India

CAG: Relaunching old pension schemes could pose fiscal risks for state

    • While the old pension scheme is under debate, the Comptroller and Auditor General of India (CAG) Girish Chandra Murmu emphasised the “risk factors” that affect states’ finances on Thursday. The Reserve Bank of India (RBI) and the 15th Finance Commission have noted the “potential sources of fiscal risks” for states, including the relaunch of old pension schemes.

      In his address to the 30th Biennial Conference of Accountants General, Murmu said, “Indian states’ fiscal health warrants careful evaluation.”

      “We have consistently highlighted risk factors affecting state finances in our State Finance Audit Reports, including increasing commitments to expenditures, increasing outstanding public debts, low mobilisation of own resources, including tax revenue and nontax revenue, and high revenue collection arrears. As well as the lack of achievement of medium-term fiscal plan targets, Murmu pointed out the negative trends in several deficit parameters under the Fiscal Responsibility & Budget Management Act.

      The State Finances Audit Reports analyse the debt maturity profiles of various states and component-wise debt trends. Furthermore, we have reported on indicators and trends related to debt sustainability.”

      “The RBI and the 15th Finance Commission have also taken note of the potential sources of financial risk for Indian states, including declining own tax revenues, the relaunch of old pension schemes in some states, increasing power distribution company dues, and periodic payments of farm loans and subsidies,” he added.

      As part of Parliamentary oversight, Murmu stressed the need to ensure unhindered access to all records, including electronic documents, for audit purposes.

      “Using appropriate modalities, concerns regarding privacy and data security can undoubtedly be addressed in the current era of e-governance, where large data sets are being digitalised,” he explained.

      Additionally, the Parliamentary mandate of scrutinising executive action must be safeguarded by actively working with the departments concerned to resolve any obstacles promptly.

      In light of the ongoing debate over the old pension scheme, Murmu’s remarks assume significance. Congress-ruled Rajasthan and Chhattisgarh have already implemented the OPS, while Gujarat and Himachal Pradesh have promised to do the same. According to the Aam Aadmi Party, it will do so in Punjab. Jharkhand has also decided to return¬†to the old pension system.

      In 2003, the then-NDA government discontinued the old pension scheme. NITI Aayog Vice Chair Arvind Panagariya described it as “immoral” to revive OPS, which would burden governments with financial costs.

      © The Deccan Era (P) Ltd

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