The State Governments were not obliged to join. They joined voluntarily. Only for the Central Government employees, it is mandatory from 1.1.2004.
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THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): Mr. Chairman, I amgrateful to the hon. Members, 15 of them, who have participated in this discussion on the Pension Fund Regulatory and Development Authority Bill.
Sir, this Bill was first introduced in 2005. It was once reported by the Standing Committee on Finance chaired, at that time, by Maj. Gen. (Retd.) Khanduri. The Standing Committee favourably reported the Bill. There were one or two dissent notes, mainly from the Left Parties. That Bill lapsed with the dissolution of the
Lok Sabha.
The Bill was again re-introduced in 2011 and this is one of the rare Bills that went through another Standing Committee procedure. This time, the Standing Committee was chaired by Mr. Yashwant Sinha. This Committee also favourably reported the Bill. There was only one Member who dissented to the Standing Committee’s report. The point I wish to make is that, at least, in the Standing Committee, there was very wide consensus for the Bill except one dissenting voice to the Bill that is now under consideration.
Secondly, when my friend, Shri Nishikant Dubey, spoke, I thought he will take credit for the fact that the interim PFRDA was actually notified by Shri Vajpayee’s Government in October 2003.
SHRI NISHIKANT DUBEY : I said that.
SHRI P. CHIDAMBARAM: That may have been lost in translation. The notification was made on 22.12.2003 and the New Pension Scheme came into force from 1.1.2004. So, when the UPA Government took office, the Scheme had come into force and all Government servants recruited after 1.1.2004 are covered by the New Pension Scheme. Every Government servant in service prior to 1.1.2004 is under the old scheme. Nobody is affected, nobody is complaining and they are not aggrieved.
The Government servants who were recruited after 2004 have been recruited with the clear stipulation that pension will be under the New Pension Scheme. To the best of my knowledge – I have been in the Finance Ministry
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earlier for some time and now again – I think by and large the Government servants have come to accept the fact that the New Pension Scheme is, in the long run, a beneficial Scheme. They may begin to earn pension only 28 or 29 years after they join service. There are one or two other developments on which I thought I should comment. I know Shri T.K.S. Elangovan and Dr. Raghuvansh Prasad Singh have some reservations. But the point is, the 2005 Cabinet which approved the Bill, had Dr. Raghuvansh Prasad Singh as a member. He was the member of the Cabinet which approved this Bill. Shri Elangovan’s Party had many members in the Cabinet which approved this Bill. Therefore, I suppose that memories are short. I acknowledge and I respect their right to express their concerns. But when it comes to supporting the Bill finally, I have no doubt in my mind that our colleagues will support us in this Bill. Actually, what you must remember is that you cannot turn back the clock. Twenty-six States have already joined the NPS. For example, Shri Semmalai opposed the Bill. But I want to remind him that Tamil Nadu also, by a Notification made on 6th of August, 2003, joined the New Pension Scheme with effect from 1.4.2003. It is hardly necessary for me to point out who was in Government in Tamil Nadu in 2003. Therefore, 26 States have already joined the NPS.
I will give you presently the number of employees who have joined the NPS. Today, the States have 17,76,973 subscribers. The cumulative contribution of the Central Government, the State Government and other NPS-like subscribers runs to Rs. 34,965 crore. … (Interruptions) All I am pointing out is, I assume that the State Governments take a decision after a most careful consideration, after considering it in their State Cabinet. The State Governments were not obliged to join. They joined voluntarily. Only for the Central Government employees, it is mandatory from 1.1.2004.Twenty-six State Governments have joined. Total number of subscribers of the Central Government is 12,01,636; of State Governments, as on 14th of August, it is 17,76,973; of the private sector, it is 04.09.2013
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2,57, 754; in NPS-lite Schemes, like Swalamban and similar Schemes, it is 20,46,849. The total is 52,83,212. The total asset under the management is Rs. 34,965 crore.
Now, the Standing Committee made a number of recommendations. I have accepted all except one. I think some one here quoted the wrong recommendation and alleged that we have not accepted that. That is not correct. The only recommendation that we are not able to accept is the Standing Committee said that we must allow a re-payable advance; now, that would convert the NPS into a current account or even a over-draft account. That is not the purpose of the NPS. The purpose of the NPS is, at the end of his or her career, a man or a woman must have a large amount of money, a cumulative amount, so that forty per cent of that is mandatory annuitisation so that they will get an annuity as pension and the remaining sixty per cent can be taken as lump-sum. This 40 per cent mandatory annuitization is also a minimum. If you want, the entire accumulation can be used for annuitization. We have accepted all the recommendations. In my opening Statement which I made, which many Members may not have heard because of an extra decibel level at that time, I had made it clear. I think all the recommendations of the Standing Committee have been accepted but for one. Only this one recommendation we have not been able to accept and I have given you the reasons.
The NPS actually offers a wide choice, as Shri Mahtab has pointed out. In fact, he was even advancing the other argument: “Why are you placing restrictions? Why do you not allow full freedom of choice?” Now, we think that at the current stage of development of the pension market and the current stage of development of the bond market, the equity market and the other instruments of investment, we should strike a balance. We have, therefore, struck a balance. There are clear restrictions on how much can be invested in the equity market, the e-market; how much can be invested in the Government bond market, the G-market; and how much can be invested in the C-market, the corporate bond
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The bond market is relatively under-developed in India. Therefore, we have to have this balance. But we have allowed the employees to have a choice that they would like all their money to be invested only in Government bonds. That has been allowed. We have also said that if you want an assured return, then the Authority will notify which are the schemes which are promising an assured return and you can then choose saying : “my money shall be invested only in the assured returns.” So, every single recommendation of the Standing Committee which has a bearing on risk, which has a bearing on capacity to take risk, has been accepted. I think this is the way the legislation should be made. Government indeed makes legislation but Government is not the repository of all the wisdom. When it goes to a Standing Committee with opposition parties members on it, which Committee is chaired by a Member of the Opposition party, when Government receives their advice, when we find that there is merit in what they are saying, we accept it. After all, we represent the different shades of opinion of about 130 crore people. So, when we get these recommendations, we are willing to accept. That is how, I believe, legislation should be made. This is a good example of how legislation should be made. It was notified by a previous Government; the Bill was introduced by a new Government; again re-introduced by the second UPA Government; it went to two Standing Committees chaired by two distinguished Members of the Opposition. Then, we have accepted suggestions and now we have reached a very broad consensus.
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I think while I have heard all of you, I take your advice seriously for future guidance. The PFRD Authority is sitting in the Gallery. He must have listened to you very carefully; he must have noted your views. We will ensure that the NPS is improved; made more secure and made more attractive for the subscribers.
Sir, I do not wish to make a long speech. The point I am trying to say is that the NPS has been there with us for nine years. We have a non-statutory Authority today and that is not good. A sum of Rs.35,000 crore should not be managed by a non-statutory Authority. It must be managed by a statutory Authority. All that this Bill does is to make the non-statutory Authority a statutory Authority. Now, he has legal powers. He can take action; he can pull up people, he can punish people, he can fine people and he can impose penalties. That power was not available so far. Now, we have got a statutory Authority.
So, with these words, I commend this Bill. I am grateful to all the hon. Members.… (Interruptions)
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SHRI P. CHIDAMBARAM: Sir, many suggestions have been made which are outside the scope of this Bill. We have got this Swavalamban Scheme introduced by my distinguished predecessor.… (Interruptions) The Swavalamban Scheme has been introduced. The Swavalamban Scheme is attracting a large number of people. The Government makes a contribution. As they make a contribution of Rs.1000, the Government makes a contribution. It has to still gain currency. It has to be popularized more. We will do so. But the Old Age Pension is not under this Scheme. That is a separate Scheme. That is a very different Scheme. This is a Scheme which is now accepted world-wide, namely, “ a Defined Contribution”. “Save for your pension as earn during your career.” That is the motto under which all the Schemes around the world are converging. You save as you earn. So, as you earn, you save, not for the current period but you save for your retirement.
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So you save, accumulate over a period of time; the accumulation is managed by pyou rofessionals; the accumulation adds to the total of your total wealth. At the time of retirement, that wealth is available for an annuity which will give you an assured pension every month for the rest of your life. That is the principle under which this has been formed. I am grateful to hon. Members. All other pension schemes which are there – old age pension, or some other pension scheme – they are outside this Act. They will be dealt with by the Ministry or Department concerned; we can make improvements there. For example, there are many other schemes. This is about people who have got a regular income, who can earn. As they earn today, they have got Current Account; they have got Savings Bank Account; some of them have got the Fixed Deposit Account. But they have no saving which actually matures at the time of retirement. Therefore, accumulation for pension is the way to save for retirement. That is what this scheme has introduced – on the day of retirement, there is a lump sum. Forty per cent of it is mandatory annuitisation but you can annuitise the entire 100 per cent, it will give you a larger annuity. You can also take a lump sum out of that.
With these words, Sir, I commend the Bill. I am grateful to the hon. Members for the support, and I request that all hon. Members, irrespective of the reservations they may have expressed, which I respect, I acknowledge, please move this Bill so that this Bill is passed.
