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Saturday, August 29, 2015

OROP: Monetizing Respect

This is the first time I am writing anything on a topic other than education and Railways. This is because I have been very intrigued by this whole issue of One Rank One Pay. I have read a lot of articles (mostly from retirees of armed forces, as to why they should get OROP) in recent times and have asked my facebook friends to help me with better understanding of the issue.

Almost all articles on OROP will argue that it is such an obvious thing that there need to be no reason given. Of course, if it is so obvious that people retiring at the same rank across decades should today get the same pension, then shouldn't it be for civilian employees as well. A lot of authors guess that this question will be coming and try to answer it as follows.

The soldiers in army (and equivalent in other forces) retire after 20 years. The officers also retire at different points in time, but mostly after 20-30 years. They have given the best years of their lives for the nation. They do not always get jobs after they leave armed forces, and therefore, all this must be factored in while deciding the compensation package, and they must have a better compensation package than what it is right now, and having higher pension would be the best way to make it a better compensation package.

But, didn't you give all this in your representation to 6th pay commission, and for that matter to 5th pay commission, and now to the 7th pay commission. Why do you believe that the successive pay commissions have not already taken all these arguments into account while recommending your pay package.

The argument then becomes that we do not trust pay commissions to have done a fair job. The IAS lobby controls the pay commission. They always ensure a better deal for themselves, and give a raw deal to us. And look, they are not even implementing what pay commission recommended that a percentage of recruits in armed police forces may come from ex-servicemen.

The last line is somewhat of an argument. It is fair to assume that the pay commission would have assumed that many ex-servicemen (not officers) would have post retirement jobs, and decided their compensation accordingly. If the pay commission knew that the probability of getting a decent job will be lower, most probably it would have recommended a higher compensation package for them in some form. OK. So the jawans can get a slightly higher pension based on this logic. But why officers who mostly are able to get post-retirement jobs in private sectors. If OROP demand was only for jawans, it would make some sense based on this argument. And here too, we need to get higher compensation, and it can not be claimed that OROP is the only way to achieve that.

So what about officers. Well, it really come back to pay commissions being biased. They have really not factored the hardships, early retirement and slow promotions while deciding the compensation package.

The problem with this argument is this. Who decides whether the compensation is adequate or not, if not the pay commission. Should compensation for millions of people be decided by public protests? There has to be a better process than that. I don't know if it would help to have a person belonging to armed forces as a member of the pay commission. It is already chaired by a Judge of Supreme Court, whom we could easily consider as neutral between civilians and armed forces.

From the arguments I am reading, there is a certain level of discomfort. For example, arguments like my pension fixed long time ago is not enough today. This gives an impression that the pensioner is still getting the same pension as he was getting a few decades ago. The reality is that all pensions are protected against inflation and they are also given a jump with each pay commission. So each pensioner is getting a better pension (even after taking into account inflation) today than 10 years ago. And if the argument is that a colonel retired 20 years ago should have the same life style as a colonel retired yesterday, why shouldn't a professor retired 20 years ago have the same life style as a professor retired yesterday.

Some people have shown numbers that someone who works for 40 years and lives for another 20 years (in which s/he is free to work, if health permits and can find a job) gets a higher total compensation compared to someone who works for 20 years and lives for another 40 years (in which s/he is free to work, if health permits and can find a job). And this is supposed to be somehow unfair. Frankly, I don't understand. If someone works for 20 years less, why should the total compensation be about the same for him compared to someone who has worked for 20 years extra.

And if the argument is that armed forces need to be compensated better for shorter tenure, slow promotions, etc., and even if we agree that pay commissions have all been biased, why not increase the pay and perks while in service. What is the argument for OROP. After all, the employer should be able to structure the compensation package in a way that will attract the best people to do the job at hand. And if the employer believes that it is better to increase pay than pension, it should be possible.

The problem is that most people are not really looking at compensation for perceived biases. If everyone in Armed forces is given a couple of extra increment to bring that so-called parity with the IAS types, that only means a few more peanuts for them. (Yes, it would increase their status in the government hierarchy, and that is important. But monetarily, it really does not make much of a difference.) Also, that is only for current employees.

And if it is a matter of compensation, and we want to redraw today the compensation package of someone who joined army 50 years ago, why not just increase pension. Can it be 60% of the last pay drawn (as modified by successive pay commissions), instead of 50%. Why insistence on equal pension. All the arguments are for higher compensation package. I have not understood why this particular way of increasing the compensation package.

Demand for increased compensation should ideally be based on arguments like the following:
  1. We are finding it difficult to recruit talent despite our best efforts. Can we offer higher package.
  2. Someone else who is doing similar tasks, with similar efficiency, in similar operating environment is getting higher pay.
  3. There should be a certain minimum level of compensation for any employee (the idea of minimum pay).
In case of OROP, I am not sure what the argument is. (I am sure there can be more arguments than the three that I have stated above.)

To summarize, there is some argument (based on the 6th pay commission recommendation that was not implemented) in favor of increasing compensation, including pension, for non-officers. There is some argument  (based on the assumption that 6th pay commission was biased and 7th pay commission will be biased) for increasing compensation for officers, but ask new officers to join New Pension Scheme. But I am yet to see an argument in favor of equal pension for same rank. I welcome my readers to inform me of articles where such arguments have indeed been given. Of course, if early retirement is the primary issue, we should spend even more on skilling those in uniforms for their post-retirement careers, and other steps to improve their chances of decent employment.

But why are we not seeing articles in media opposing OROP or even seeking clarifications like the one I am seeking in this article. If the OROP is such an obvious thing to do, then what is government waiting for. We can't be thinking of a few thousand crores per year, if those are the legitimate dues of people who defend our borders. As someone said on my facebook discussion, war is expensive and to maintain war machine is expensive. We must be willing to pay that price for independence.

This is what I believe is happening.

Armed forces are arguably the most respected institution in the country. And in the era of cross-border terrorism, not many are willing to argue or discuss military pay. Keep them happy. Give them anything they ask.

There is also a fear that questioning the military pay would label one as unpatriotic. (And if one is careful in reading this article, I am not questioning military pay or perks or pension, even suggesting that they be increased, only seeking answer to the basis on which such a package should be decided. I certainly don't want to be labeled as unpatriotic.)

This is more so when both Congress and BJP have already promised OROP, and it is obvious to everyone that sooner or later, there would be a substantial increase in the compensation package, irrespective of any arguments. Why be considered unpatriotic when the deal is almost done and one would not have any influence on the deal. (But academicians always want to know the answers even when they have no influence.) By the way, I believe that since it is almost a done deal, we must implement it at the earliest, and close this chapter. Every day of this protest is affecting the country negatively.

The veterans on the other hand have figured this out. The public has huge respect for armed forces. Also, the public at large has strong negative feelings about the bureaucracy and the politicians. By making this a public issue and essentially blaming the IAS and politicians for the mess (and not waiting for the 7th pay commission report), they have a much better chance of improving their compensation package.

But this, sadly, is monetizing respect.


payas said...

One of the reasons of things not moving forward is veterans want to review the pension plan or package annually, however, on the other hand goverment wants to do this every 5 years.

ms said...

Sir. I think u have got it wrong. If pay commissions were that capable and fair, why would pension of soldiers be reduced from 75% to 50% in third pay commission. Also that came with rider of 33 years service which was a clause for civilians and as a result pension for defence personnel works out even less than 50%. Though some weight age for years of service was added for different ranks but it still could not reach 33 years and hence less than 50% pension. If pay commissions and governments doing such wonderful jobs then there should not be requirement of any employee unions. Everyone should be kindly accept their recommendations. Service personnel have always believed the government to look after their welfare but look what it had been doing. Goverent fights for every case till supreme court against defence people. Defence civilians have been extended all the privileges of defence persons without being accountable or facing hardships of defence people. Everyone wants to equate with defence on anything howevercsmall which is being given to defence due to peculiar service conditions but defence service personnel are being degraded in status as well as monetarily. Pray check how many orders for improvement in service conditions have been issued in last ten years by defence ministry and compare with civilian dopt. May be ratio will be 100:1 in favor of dopt.
Why do not we have a separate pay commission for defence if pay commissions are the panacea for all the ills.
No one is monetizing respect. Non fin upgradation has been given to group A officers by which all will at least get joint Secretary and most of them will get additional secretary pay and pension. This has not been extended to defence forces as these are not considered group A services. This is supposedly for restricted career progrssion. Worst progrssion is available in defence yet it is not made applicable for defence forces. What are defence services then. Then why have common pay commission.
Koshiyari committee accepted OROP after listening to negative arguments of the same class of bureaucrats who firm part of pay commissions.
Let us understand the real issue. It is not money. Why retired soldiers have to resort to what they are doing that needs to be understood.

Dheeraj Sanghi said...

@ms, May be one day I should read the 3rd pay commission report and understand their reasons for reducing the pension. But without the benefit of their logic, I can at least ask a few questions. Should a pay commission have a right to reduce the compensation package (for new recruits only) or not. Should a pay commission have a right to redraw the parities. If you disagree with those rights, then essentially you are arguing that whatever British did in terms of relative pays, we must maintain that relativity for all times to come. And this, by the way, would be absolutely great for my profession too. Britishers had pay scales wherein those positions which were largely occupied by Britishers were paid hugely. So armed forces officers, and university vice chancellors were rich. If we were to have that pay parity today, a VC in a university would be getting more than a crore of salary.

For civilian employees too, the pension benefits have been severely curtailed for those who have joined since 2004. By your argument, that is injustice and must be fought.

By your argument, the pay commission should simply come up with a factor by which everyone's income/pension should go up maintaining century old parities, and ignore market, ignore technology development, ignore changes in working conditions, ignore current requirements, etc.

But of course, I have already agreed in my article that one solution may be to have one of the members of pay commission from defense. Perhaps even a separate pay commission. Though I must quickly add that every profession would argue that they have peculiarities which the pay commission for a large government fails to capture. Should we have a large pay commission. Should we have multiple pay commissions. These are questions to be thought over.

And I am glad that you agree that armed forces veterans are acting like trade unions.

ms said...

Sir, armed forces veterans are not acting like trade unions. Govwrment is acting like one and using words like negotiation etc to make justified already approved demand like a demand being negotiated.

iitmsriram said...

dear @ms, pl. do read the 3rd pay commission report, I suspect you have not. Volume 3 of the report contains the armed forces segment and it explains why with the introduction of gratuity on par with civilians, the pensions also will go on par with civilians (after accounting for the lump sum value of the gratuity). The formula also is not a flat change from 75 % to 50 % and neither is the formula a constant 33 years service - there is lot more structure and reasoning given. Like all pay commission reports, there is lot of reasoning given along with lot of data. Coming back to the present, there is an issue with military pensions in that retirees draw pension for many years and hence there is some erosion of the pension value. This can be compensated by other means (like redoing the old age triggered pension increase 20% at age 80 etc into years-pension-drawn trigger 20% at 20 years etc).