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India Updates
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REPORT ON PENSIONARY LIABILITY OF THE UNION GOVERNMENT SUBMITTED
New Delhi ~ June 25 2001
The Union Finance Minister Shri Yashwant Sinha was presented the Report on the Pensionary Liability of the Union Government by Shri A.M. Sehgal
Controller General of Accounts here today. The Report has estimated the future pension liability on assumed inflation rate(s) ranging from 6 to 10% p.a.
The Report notes that the medium term impact of Government of India's pension liability was not so alarming as might have been apprehended. The Report recommends that modern methods of estimating pension liability based on actuarial calculations need to be adopted. It has recommended a format to be adopted for better management information system. As an interim measure it may be useful to carry out a sample survey of existing pensioners/family pensioners to determine their age profile and consequential pensionary liability the Report adds.
The Report also draws attention to the need for switching over to a funded system of meeting pension liability. The advantage of a funded system is that it makes Government's pensionary liability transparent and explicit thereby enabling better fiscal planning it notes.
The Working Group was constituted under the chairmanship of the Controller General of Accounts to (i) review the pensionary liability of the Union Government over the short/medium term; and (ii) to recommend appropriate formats/information system to facilitate accurate assessment of the pensionary liability in future. The Working Group included representatives of other Departments like Ministries of Defence Railways and Telecommunications in addition to the Budget Division (Department of Economic Affairs) and Department of Pensions.
In order to determine future liability it was important to know the age profile of the pensioners/family pensioners. However this information was not available in most Departments. Consequently longevity tables of LIC could not be utilized for estimating future pension liabilities. To overcome this difficulty it was decided that each department may presume mortality rate of 5% among pensioners and 10% among family pensioners to arrive at estimates of future pensioners/family pensioners. As most of the Departments had information regarding recruitment of man-power in previous years
they were advised to take that into account for determining number of future retirees. The pension estimates from 2001-2002 to
2009-2010 were estimated on the basis of above criteria. The working group ignored future imponderables such as setting up of another Pay Commission.
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