Economic Cell is a mouthpiece on economic policies for J.K. Organisation. The idea is to share our thoughts on major economic and socio-economic issues of significance for the economy, with the intelligentsia, and the policy makers at large, on an open platform, so that we can share our thoughts and benefit from wider responses.

Hari Shankar Singhania
June 20th 1933 – Feb 22nd 2013

President-jk JK Organisation with about 100 years of passion for success and achievement has created many new initiatives. This blog of our Economic Cell is yet another initiative from us, to share our views on the economy, trends and policy issues of the country. I welcome all wise thinkers to this interactive platform.

OROP Must Be Re-looked At
Thursday, September 10, 2015

This morning a friend of mine wanted my opinion on OROP – One Rank One Pension.  Very difficult to give one’s opinion on an issue that had been long pending.  The government has virtually succumbed to the pressure from the retired army personnel.  Were they as powerful as our farmers as a lobby group?  I wonder.  But I congratulate them on their success, though I have a different view.  I feel OROP should have been  considered with some riders.

There was a time, not many years ago, when most of us in the private sector companies used to be sermonized on why and how we should employ retired army personnel.  It does not matter whether they sought early retirement at the age of 28 or 35 or 56.  We should employ them to derive many purposes.   I do not want to go into the details.  But in reality what happened, many of our young  personnel took retirement, and then because of the encouragement and patronage of the government, many (almost all) got employment in the private sector.    And they used to be paid substantially high salaries.   Most government offices today have large number of army personnel.  These people enjoyed the double benefit of pension and also salary.  I personally know of many retired army personnel in private companies.  My opposite neighbour (aged 80 and a widower with no family responsibility) is still employed in a private construction company and drawing a good salary.  The other day he came out of his mansion – like bungalow, saw me standing on the road side.  He could not contain himself, came running to tell me how nice the government has been, and that BJP government had the guts to do it.  His income has increased by 75%.  This is true for almost all the retired army personnel – OROP has been a big bonanza which they never expected.  Ultimately they did what the civilians do – sit on a dharna and pretend hunger strike – just as factory workers  or municipal corporation workers do.

The overall cost to the exchequer, as a result, is estimated at $1.7 billion.  Where from this money will come?  Who bothers so long as this money is collected from you and me?  This undoubtedly is a serious fiscal burden for the government and tax burden for rest of the country.  But government’s agreeing to the OROP demand is a  clear sign of weakness of the government that came to power with much fanfare and promise of a good governance.

Personally I am not opposed to OROP but I wish it could have been selective and not free for all.  In the present environment, when the government employees had had a substantial increase in their salaries and wages, an age-bar criteria could have been applied as otherwise, there is an inherent incentive for army personnel for joining the army only to retire.  A very simple question.   What is our definition of retired army personnel?  In the army, there is more incentive to retire than to serve, even as Indian army is always short of personnel.

One rider that could have been applied is that OROP should be applicable only for those who have served the army for 20 years or more.  Second,  it should not be applicable for those who were in the army but in non-battle operations like retired army doctors.  My dentist is a retired colonel, he left army because he wanted to start his own business as a dentist.  Now, he has an elaborate dental clinic that employs his son, daughter and  other relations.  He is a good doctor, having flourishing business.  Should we need to give him pension because he was in the army once in a life time?  Same is applicable for those engaged in other professions such as legal service.  For such people, there is no need for pension.

What is going to happen as a result of OROP is likely this.  If you look at total defense expenditure, there are two components – capital expenditure and revenue expenditure.  Given that the central government has constraint of resources (I presume it is so), revenue expenditure will increase and capital expenditure will suffer.  Our army needs to be modernized more in terms of equipments and training.  Pandering to the wishes of (generally) the people, who have left the cause of the service for their personal benefits, is harmful for the government and also the army – not to speak of the country.

T.K. Bhaumik,
Economic Advisor