DMK fails to restore old pension plan, FM’s remarks irk govt employees

Besides going back on a poll promise to bring back the old pension scheme, the DMK-led state government has equated pensions to freebies which has further irked government employees

P.T.R. Palanivel Thiagarajan (left) with M.K. Stalin before the presentation of the budget | File Photo: Twitter

The Dravida Munnetra Kazgham (DMK) had promised in its election manifesto in the 2021 assembly elections that it would restore the old pension scheme when it comes to power.

But the party has now gone back on its poll promise and to make matters worse, the state’s finance minister Palanivel Thiaga Rajan equated pension to freebies which has angered government employees.

Pension to government employees was not regarded as an expenditure to the exchequer for the late DMK patriarch M Karunanidhi but as an “asset creation”.

However, the state finance minister Palanivel Thiaga Rajan seems to think differently as he has publicly declared that it is impossible for the government to implement the old pension scheme citing a financial crisis in the state. Adding salt to injury, he reportedly said that pensions were akin to freebies, which has irked government employees.


Criticising the Tamil Nadu government’s decision, a teacher, Bhuvana Gopalan said that if the government was constrained for funds, the minister could have said that the pension will be paid in the future.

“But to equate pension with freebies is wrong. Pension is our basic right. It is our money that the government takes from us every month and how can he say that it cannot be returned?” lamented Gopalan.

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‘What happened to ₹40,000 crores?’

Until December 2003, the Central and state government employees were covered under the old pension scheme. The employees who had joined the service from January 2004 became eligible for the new pension scheme called Contributory Pension Scheme, which has been renamed as National Pension Scheme (NPS).

Under the old pension scheme, the government used to pay a monthly sum equal to 50 per cent of the last salary drawn by the pensioner. If the pensioner died, the family too received the pension. Besides, the pensioners also got gratuity.

Under the NPS, the employees pay 10 per cent of their basic salary and dearness allowance and the government also puts in the same amount. After retirement, they will be paid their pension as a lumpsum and not as a monthly payment.

According to M Soundararajan, president, Tamil Nadu Cooperative Department Employees Association, the NPS was implemented in Tamil Nadu in 2003. From 2003 to date, the contribution made by both the employees and the government would amount to a tidy sum of ₹ 40,000 crores, he said.

“If the state decided to implement the old pension scheme, that amount itself will be sufficient to pay a monthly pension and around 8 lakh employees will get benefitted,” pointed out M Soundararajan.

The gratuity had a maximum ceiling of ₹ 20 lakh, but even that has not been included in the NPS. Soundararajan added that at least the gratuity is an issue that comes under the ambit of the Union government.

“But pension is a social security issue, which the state government should ensure that each and every employee receives,” he rued, adding that if the individual contribution had been made to a General Provident Fund, it would have been benefitted us.

Also read: TN white paper on state’s finances hints at tax hike in upcoming budget

‘Govt should invite us for a talk’

The aggrieved government employees have also raised questions over discrepancies in figures on government expenditure on salaries mentioned by the state finance minister in his recent interview to a private Tamil channel.

In his budget speech, the minister had said that the government was incurring about 19 paise for salaries and 8 paise on pensions for every rupee. During his interview, however, the minister said that government was spending 65 paise on every rupee on salaries and pensions.

“Why this discrepancy?” pointedly asked G Venkatesan, state coordinator, Joint Action Council of Teachers Organisation – Government Employees Organisation (JACTO-GEO).

It is to be noted that in his White Paper, the minister had said that while the expenditure on subsidies are increasing, the expenditure on salaries and pensions was decreasing.

In 2006-2007, under revenue expenditure, the salaries were 27.95 per cent and pension benefits stood at 14.32 per cent. It has reduced to 24.92 per cent and 10.50 per cent respectively in 2020-2021. Whereas in the same period, the expenditure on subsidies has shot up from 12.65 per cent to 19.43 per cent.

“So, the government employees are in no way the reason for the state government’s financial burden,” said a statement from JACTO-GEO.

Venkatesan also pointed out that though the NPS started in Tamil Nadu on April 1, 2003, the state has still not joined the Pension Fund Regulatory and Development Authority (PFRDA).

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The PFRDA is like the Insurance Regulatory and Development Authority. “They will ask us to invest our money (the contributions made by the employees and the government) in the share market,” explained Venkatesan. But the state government has been dragging its feet about joining the PFRDA.

“Because once they become part of the authority, they will not have a say in the deployment of the funds. As of now, our money lies with the state treasury. But once the state joins PFRDA, the money will have to be transferred, ” he said.

Since the state has not joined the PFRDA, the treasury currently provides interest to both the contributions made by the individual and the government. That way, the state incurs an expenditure of ₹4,000 crores every year.

Interestingly in 2016, the state had constituted an expert committee headed by Shantha Sheela Nair IAS, to study the feasibility of bringing back the old pension scheme.

Venkatesan believed that the report, which some sources said has not been submitted as yet, would favour NPS.

“When the committee asked the views of the stakeholders, we made some representation. But at that time, the committee members argued against the old pension schemes. It is not difficult then to judge what will be the outcome of the report,” he said, urging the present government to invite them for a discussion on these issues.

The ball is now in the court of the DMK-led government.