Bengaluru: The Karnataka Finance Department, led by Chief Minister Siddaramaiah, has expressed support for the Unified Pension Scheme (UPS) recently approved by the Modi administration. However, the final decision on its implementation will hinge on political consensus within the ruling Congress party.
Political Dynamics
Congress president Mallikarjun Kharge has already criticised the UPS, claiming the ‘U’ stands for “U-turns” by the government. Despite this, Siddaramaiah has indicated that his government is currently examining the new scheme. The state Finance Department appears to favour the UPS over a return to the Old Pension Scheme (OPS), with a senior official stating, “We should be supporting the UPS, which is better than reverting to the Old Pension Scheme (OPS).” However, the official also noted that the Congress party’s political stance, which seems supportive of the OPS, would play a significant role in the final decision.
Election Manifesto and Political Ramifications
In its Karnataka election manifesto last year, the Congress promised to “sympathetically consider” bringing back the OPS for government employees currently under the New Pension Scheme (NPS). The party has already revived the OPS in Himachal Pradesh and Rajasthan. A decision on the UPS will have significant implications for approximately 5.26 lakh government employees, 2.20 lakh staff at various boards and corporations, and 4.5 lakh pensioners in Karnataka.
Financial Considerations
The Finance Department has raised concerns about the financial sustainability of reverting to the OPS, describing it as “fiscally disastrous” for the state’s finances in the long term. The Medium Term Fiscal Plan 2024-28 emphasised that a switch back to the OPS would necessitate cuts in welfare and developmental expenditure.
Chief Minister’s Economic Advisor, Basavaraj Rayareddi, has described the UPS as a “win-win,” noting that it sits between the NPS and the OPS, potentially offering benefits to both the government and its employees. Siddaramaiah is expected to discuss the UPS after the 16th Finance Commission’s visit to the state on August 29.
Opposition from Employee Associations
The Karnataka State Government Employees Association has rejected the UPS, standing firm on its demand for a return to the OPS. The OPS, which was discontinued in favour of the NPS in 2006, offers retired government employees 50% of their last-drawn salary as a monthly pension, adjusted for Dearness Allowance (DA) hikes.
Features of the Unified Pension Scheme
Under the UPS, government employees who complete 25 years of service would receive an assured pension of 50% of the average basic salary in the last 12 months before retirement. For those with a shorter service period, up to a minimum of 10 years, the pension amount would be proportionate. A minimum pension of ₹10,000 per month is assured for those with at least 10 years of service.
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