One Rank One Pension Case

GOVERNANCE/ ECONOMY

• GS-2: GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

One Rank One Pension Case

Context: The Supreme Court on Wednesday ruled there was “no constitutional infirmity” in the way the government had introduced ‘one rank, one pension’ (OROP) among ex-service personnel. 

• The scheme, notified by the Defence Ministry on November 7, 2015, was challenged by Indian Ex-Service Movement, an association of retired defence personnel.

What is One Rank One Pension?

• OROP means that any two military personnel retiring at the same rank, with the same years of service, must get an equal pension. 
  • Koshyari Committee in 2011 defined OROP as a uniform pension to be paid to armed forces personnel retiring in the same rank with the same length of service, irrespective of their date of retirement
• While this might appear almost obvious, there are reasons why this was not the case earlier.
• Military personnel across the three services fall under two categories, the officers and the other ranks, as they’re called. 
• The other ranks, which are soldiers, usually retire at age 35. They retire early country needs a young military.
• Unlike government employees who retire close to 60, soldiers can thus miss out on the benefits from subsequent pay commissions. And since pensions are based on the last drawn salary, pensions too are impacted adversely.
• Therefore, it was argued that early retirement should not become an adverse element for what a soldier earns as pension, compared with those who retire later.

When did the demand for OROP started?

• From 1950 to 1973, there was a concept known as the Standard Rate of Pension, which was similar to OROP.
• In 1974, when the 3rd Pay Commission came into force, certain changes were effected which was further modified in 4th Pay Commission.
• What ultimately happened was that the benefits of the successive pay commissions were not passed to servicemen who had retired earlier. 
• Pensions differed for those who had retired at the same rank, with the same years of service, but years apart.
• Ex-servicemen demanded OROP to correct the discrepancy. Over the decades, several committees looked into it.
• The Brig K P Singh Deo committee in 1983 recommended a system similar to Standard Rate of Pension, as did the Parliamentary Committees on Defence.

What are the financial implication of OROP?

• Meeting the demand was argued to be financially unsustainable because soldiers retire early and remain eligible for pension for much longer than other employees. 
• This would enlarge Defence Ministry’s pension budget (more than one-fifth of the total defence budget) which will further impact the Ministry’s capital expenditure.
• The total defence pensioners are 32.9 lakh, but that includes 6.14 lakh defence civilian pensioners.
• The actual expenditure of the Defence Ministry on pensions was Rs 1.18 lakh crore in 2019-2020, Rs 1.28 lakh crore in 2020-2021
• When the late Manohar Parrikar was Defence Minister, it was estimated that a one-time payout of Rs 83,000 crore would be needed to clear all past issues.
• However, every time a new pay commission came, it would lead to substantial payouts to bring parity.

What was the concern even after government implementing OROP from 2015?

• Petitioners submitted in Supreme Court that the government had altered the initial definition of OROP and, instead of an automatic revision of the rates of pension, the revision would now take place at periodic intervals. 
• According to the petitioners, this was arbitrary and unconstitutional under Articles 14 and 21.

What was the court’s ruling?

• The court did not agree with the argument that the government’s 2015 policy contradicted the original decision to implement OROP.
• The court also said that while the Koshyari Committee report furnishes the historical background of the demand, and its own view on it, it “cannot be construed as embodying a statement of governmental policy”.
• After evaluating the government’s policy, it found “no constitutional infirmity in the OROP principle as defined by the government communication dated 7 November 2015”.

Connecting the dots:

• Central Armed Police Services
• Atmanirbhar Bharat