LOOKING BACK AT 6 CPC PENSIONS THROUGH THE OROP AND 7 CPC PRISM

This blog post seeks to further examine hypothetical issues arising from a reference in the previous blog-post to some attempts apparently underway for a review of pensions of pre 01 Jan 2006 retirees as fixed by 6 CPC on the principle of minimum of pay for rank in pay-band and to get these fixed on basis of increments earned in the pay-scale corresponding to the appropriate 6 CPC pay-band.

It may come as a surprise to many that at this time, when everyone seems totally engrossed with OROP and 7 Central Pay Commission, such a retro approach of dealing with issues of 6 CPC should be on display. But, the whole matter of pensions and benefits is a continuum and CPC date markers do not provide for some rigid barriers that can't be crossed. Besides, what transpired at the time of implementation of 6 CPC will have a cascading effect on OROP and, in turn, on recommendations of 7 CPC.

As regards this issue of increments based 6 CPC pension fixation, I have very few details other than the rumour that it is based on some litigation involving veteran Major Generals who had their pensions fixed based on increments they had earned in their pay-scale and not on the principle of minimum pay for their rank in the pay-band.

Now assuming there is some basis to this analysis, we need to go back to the tables and fitments of SAI 2/S/08 as amended. To simplify and to illustrate the matter, on a purely hypothetical basis, a table can be derived from the SAI ibid and its subsequent amendments for consideration as follows :

TABLE RELEVANT TO A PRE 6 CPC LT COL RETIREE

  

5 CPC Pay As Laid Down In Amendment To 2/S/2008	6 CPC Basic Pay Corresponding To 5 CPC Pay Scale As Laid Down In Amendment To SAI 2/S/2008	6 CPC MSP	6 CPC Grade Pay	Total Revised Pay	50% Of Total Revised Pay	The Number Of Years Required Currently To Reach This Increment Stage
13500	38530	6000	8000	52530	26265	13
13900	38530	6000	8000	52530	26265	14
14300	39690	6000	8000	53690	26845	15
14700	39690	6000	8000	53690	26845	16
15100	40890	6000	8000	54890	27445	17
15500	40890	6000	8000	54890	27445	18
15900	42120	6000	8000	56120	28060	19
16300	42120	6000	8000	56120	28060	20
16700	43390	6000	8000	57390	28695	21
17100	43390	6000	8000	57390	28695	22
17500	44700	6000	8000	58700	29350	23
17900	44700	6000	8000	58700	29350	24
18300	46050	6000	8000	60050	30025	25
						26
						27
						28
						29
						30
						31
						32

Granted, the corresponding 6 CPC basic pay column does not tally with the 6 CPC pay-band 4 starting at 37400/-, but that is how the pension for Lt Col rank was re-fixed at 26265/- as against the previously fixed 25700/- based on PB-4. Pay during 5 CPC, as actually earned, would logically have to be the basis for arriving at equivalent pensions for 6 CPC if at all the arguments for basing pensions on increments earned during 5 CPC are tenable.

In the case of a Lt Col retiree, of course, it would not be too hard to arrive at this hypothetical, re-fixed pension based on increments gained during 5 CPC. All he would have to do would be to take out his DND statement issued on the revision caused by the rank-pay case matter. From there, it would be a simple matter to read the revised pension as shown in the column titled "50% Of Total Revised Pay". A Lt Col who had earned increments in the DND statement so as to reach a basic pay of 17900/- would then, hypothetically, be eligible for a 6 CPC pension of Rs.29350/- and not the Rs.26265/- as fixed from 01 Jan 2006.

But, an important consideration arises here. Would basing the 6 CPC pensions based on increments earned during 5 CPC amount to OROP having been granted for all ex-servicemen during 6 CPC? It would certainly appear to be a case of full parity rather than a modified parity necessitated by the parallel, if one does exist, and that is a very big if, in the eumored litigation involving retirees in the rank of Maj Gen.

However, by having a similar increment based pension for pre 7 CPC retirees and terming it as OROP for all, the 7 CPC recommendations do confound the matter somewhat.

In the above example, true OROP would have resulted if the pension had been fixed for the Lt Col retiring in say 2003 at DND basic of 17900/- if his pension had been fixed equal to pension of another Lt Col with as many years of service retiring in say July 2006. This pension would have been a lot higher than the one based on increments earned during 5 CPC.

The last column in the table indicates how many years would be required during 2006 and later to reach the equivalent 6 CPC basic that a 5 CPC retiree would have retired at. In most cases there would be a significant difference between the years of service put in by a pre 01 Jan 2006 retiree to be at the same level of equivalent 6 CPC basic pay.

That appears to indicate that the manner of OROP based on increments as suggested by 7 CPC may not be the real OROP as we understand it. It also appears to suggest that the logic of obtaining an increment based re-fixation of 6 CPC pensions for 5 CPC and earlier retirees may not be that far fetched.

Increments Earned, Pensions And OROP

In the matter of VI CPC pensions fixed for pre 01 Jan 2006 retirees, circular 397 issued by PCDA states at para 6.1, "The consolidation of pension will further be subject to the provision that the consolidated pension, in no case shall be lower than 50% of the minimum of the pay in the pay band plus the grade pay, military service pay (MSP) and ‘X’ Group pay (where applicable) introduced from 01.01.2006 corresponding to the pre revised scale from which the pensioner had retired/discharged for 33 years qualifying service and for lesser qualifying service (including admissible weightage) it will be proportionately reduced".

This circular was amended vide Circular 500 subsequently to clarify, "...the minimum guaranteed pension and ordinary family pension in respect of Pre-2006 Commissioned officers, pensioners/ family pensioners has been determined as 50% (fifty) and 30% (thirty) percent respectively, of the pay in the pay band corresponding to minimum of prerevised pay scale as indicated under fitment tables annexed with SAI 2/S/2008 as amended and equivalent instructions for Navy & Air Force and SAI 4/S/2008, plus Grade pay corresponding to the pre-revised scale from which the pensioner had retired/ discharged/invalided out/died including Military Service Pay, wherever applicable. date of fixation of pensions (01 Jan 2006 as against the original..."

or as the accompanying MOD letter had stated,

"..minimum of the fitment table for the rank in the revised pay band as indicated under fitment tables annexed with SAI 2/S/2008 as amended and equivalent instructions for navy and Air Force and SAI 4/S/2008 plus the Grade pay corresponding to the pre-revised scale from which the pensioner had retired ...... including Military Service Pay..... ".

The Circular had fixed this minimum guaranteed pension wef 24 Sep 2012.

The date was subsequently changed to 01 Jan 2006 very recently.

In this season of talk of increments based pension fixation, fuelled by the new matrix put out by 7 CPC, it has come to light on the web that some stalwarts seem to suggest that fixation of the minimum guaranteed pension wef 01 Jan 2006 needs to take into account the increments actually earned in the "pre-revised pay-scales" by pre 01 Jan 2006 retirees. It is understood this is based on some judicial ruling applicable to retirees with Maj Gen rank in which increments earned are said to have been made a basis for determining the pensions of these affected Officers.

As details have not been shared, it can not be said with any certainty whether or not the context of litigation involving the Maj Gen retirees would also apply to other pensioners.

But it is an interesting development.

There would be a need to study where in the fitment tables would a particular pensioner stand after considering the increments he had earned in the pre-revised scale (pre 01 Jan 2006 pay-scale).

Then there would be the calculation and payment of arrears from 01 jan 2006.

But would that not affect the calculation methodology for OROP? It may become necessary for OROP calculation to be based on number of increments required to reach a certain number of years of service for a pay-band for a specific rank rather than on the "average of minimum and maximum pension in 2013", whatever that means.

Pay-Bands, Tables And Fitments For OROP

In the face of unknowns involved in a matter such as OROP, it may be a more prudent approach to first try and identify the type of variables one could come across rather than to attempt assigning values to those variables.

There is no need to be troubled here with the notion that for arriving at a OROP fixation one would have to apply some esoteric principle that an Operations Research boffin might have conjured up on one of his more productive days.

At the same time, I have always felt that before undertaking the churning out of tables for OROP estimates, with jubilant cries of "Viva Excel!", I might as well put in some system for validating guesstimates and opinions. Any time I had posted a table on what OROP or the rank pay revisions could involve, I tried to take pains to underline the fact that figures quoted were hypothetical, a means to illustrate a point, subject to validation and/or not for universal application.

However, some extremely useful information has recently been made available on the Aerial View blog by way of painstakingly compiled tables on what OROP could be, based on pay-bands applicable post 01 January 2006. In face of the marked silence from the Government and ESM associations on the subject, these tables are like a shining beacon, pointing towards where the reality would probably lie.

For the purpose of appreciating a need for validation, the following points might be of use

• OROP is at a different plane altogether when compared to the modified parity principle of a pre/post CPC fixation of pensions for pre CPC retirees.

• In the context of VI CPC, it needs to be remembered that fitments in the MOD letter dated 2008, and its amendments, centered around the concept of modified parity. That will not apply for OROP.

• Circular 500 and its precursors were all geared towards the "minimum of pay for rank in pay-band" principle. OROP is an entirely different paradigm.

• The concept of OROP can be seriously undermined if the process of calculation gets mired in the old concept of fitment tables that applied to pre/post VI CPC pay fixation.

• OROP seeks total parity of pensions of older retirees with pensions of present retirees (for the time being, those retiring in 2013).

As an example, to be absolutely certain of what is implied in a table, which for the purpose of suggesting the OROP pension of a Major with QS of 13 years, states the pay of a Major is 29820/- at QS of 13 years, it needs to be clearly understood that a per the table the pay would be 29820/- in 2019 for a Major commissioned on 01 Jan 2006. 

As to what would the pay of a Maj with a QS of 13 years be in base year 2013, the answer would be based on a host of other parameters such as fixation of his pay from Jan 2006 and date of actual promotion, among others. Again, the very fact that QS of 13 years would not result in a pension, goes to show the hypothetical nature of such an estimate.

For that exact reason, for OROP, we need to have validation of estimates in pay-band tables against actual pay and pension data as applicable to personnel retiring in 2013.  For such validation, the focus should also be on actual pay/pension data as applicable in base year 2013. If there is no actual average pension data for 2013 in respect of a certain rank cum years-of-service combination, then pay actually being drawn in base year 2013 by serving personnel with that rank cum years-of-service combination can be a basis for arriving at the "potential average pension".

Sometimes, a blank table does help to point out what the missing variable values are and how these can be obtained. An absence of actual figures may not exactly seek to reinforce the "Less Is More" principle, but it can help in a clearer understanding of what the issues are or could be. In a previous blog-post I had sought to suggest such an approach. Now, in order to include the pay-band estimates currently available, I have updated the table-format in that blog-post as follows:

(By hovering the cursor on the table format it can be viewed with magnification)

OROP: Another Look At Issues Of Average Pensions And Pre-Mature Retirees

As details about Government thinking on OROP implementation have failed to emerge, there has been time on stake holders’ hands, permitting at least some of them to step back and examine all aspects of the matter in a more detached frame of mind.

To have a rational view, it cannot hurt to try and justify even extreme opinions diametrically opposite to one’s own by searching for principles that could possibly support them. In this manner, one can be a little surer of one’s own stand on issues and also arrive at a fuller understanding of what is involved.

In the context of the 5^th September 2015 statement about OROP, two issues could be subjected to this process.

Average Of Pensions In Base Year:

It caused a bit of consternation in many quarters that OROP fixation would involve averaging of pensions in base year. Since the wording of the statement was so vague, and given past experiences of denial of dues based on phraseology (the “as on” vs “where is” example comes to mind), stake holders, like burnt children dreading fires, had forebodings of the worst kind.

*What if the average was to be taken of all pensions paid in base year, including the low pensions of pre 2006 retirees of same rank and same service?

*Why was an average required at all? Why could not the highest pension, for a certain rank with a certain number of years of service, be the basis for fixation of pensions of all previous retirees in the same rank and the same years of service?

Perhaps this "averaging" clause can be justified on the grounds that in the base year, serving personnel who retire in a certain rank and with the same number of years of service may not have the same pension. Their pensions would be based on last pay drawn and these could vary from one retiree to another, all retiring in the base year and in the same rank and with equal number of years of service. The last pay would be dependent on criteria other than years of service, such as date of promotion to the rank, hence service in that rank, as well as initial fixation of pay on the last promotion.

This in fact leads to what is being stated as the defining basis of OROP, viz., “same rank and equal years of service”.  Now, does that apply also to personnel who retired one year prior to OROP base year?

Take the example of a Colonel who earned a pension of Rs. 26111 33950/- in the year before base year on completing 24 years of service. What if another Colonel, also with 24 years of service, gets his pension fixed at Rs.26953 34880/- in the base year on account of the way the latter’s pay was fixed on promotion or the length of his service in the rank of Col? Would the former then be eligible for getting his pension upgraded to the level of the latter’s pension regardless of the last-pay-drawn principle? Let us not forget, both Colonels in the example are post VI CPC retirees.

Given this consideration, perhaps averaging of pensions in base year for the same rank and with same years of service could have some basis for fixing pensions of all previous retirees, keeping in mind no previously fixed pension would be brought to the level of the base year average if the average is lower.

But questions and doubts remain:

·  When Hon’ble Defence Minister mentioned "average of minimum and maximum pension in 2013", of all the doubts that sprang from that sentence, one of the most important was, and still is, were these to be the pensions actually paid/fixed in respect of those who retired in base year? Or is some calculation based on existing pay band to be the criteria?

·   What about the rank and years of service combinations for which there were no retirees in base year?

·     What about that old ambiguity, repeated ad nauseum, about older retirees who got their ranks based on time-bound promotions after putting in 20 to 29 years of service for which there would be no parallel in base year?

Till issues such as these get cleared up, it would be extremely rash to voice a firm opinion on how and why “averaging” could make sense.

Applicability Of OROP To Pre Mature Retirement Cases: This proved to be the most volatile of all issues after the statement was read out. How could excluding a premature retiree from benefits of OROP ever be justified? Let us be clear, a person who took pre-mature retirement after a service of 21 years in 1975, 2001 or 2007 would be entitled, under OROP, to the current pension of someone retiring in base year in the same rank with equal service. He would not get the OROP pension of someone retiring in the same rank but with more service, say 22 years or more. So what is the issue with that?

There is a clear basis for allowing someone to proceed on pre-mature retirement. If PR has been granted, then it is as per Service norms and a pension has been duly earned. That older pension would need to be equalised with current pension of a base year retiree in the same rank and with the same years of service. A pension is a pension is a pension. A pre mature retiree’s pension cannot be treated differently from the pension of someone who super-annuates from service, now not even in the matter of weightages.

Whether or not a pre-mature retiree takes up a lucrative second career, perhaps even with the help of DGR, would not seem to be a basis for a differential treatment of his duly granted pension in terms of parity with OROP pension fixed for his rank and years of service.

Some Ideas On Possible Manner Of OROP Fixation

In order to not misinterpret or over-interpret the statement issued on 05 September 2015 regarding the outlines of OROP, there is a need to raise more queries. Even if no one provides answers to these queries, at least the possibilities get narrowed down and a clearer understanding can emerge on where the OROP pension fixation could be headed, at the same time keeping firmly in view where it should be headed.

The Hon'ble RM had clearly stated,  "..Pension will be re-fixed for all pensioners retiring in the same rank and with the same length of service as the average of minimum and maximum pension in 2013..".

This had been the subject of some speculative reasoning in a previous blog post.

However, we need to introduce some rationality into assumptions. Some of the restrictions that can be placed on the previous interpretations can be summarised as follows:

*The average pensions mentioned in the statement could, most probably, refer to the average of pensions of ESM actually retiring in the calendar year 2013. (It is well known there are ongoing representations and discussions that it should be Fin Yr 2013-14 or the period 01 Jul 2013 to 30 Jun 2014, but for the time being, let us stick to what the statement contains, viz., calendar year 2013).

*The average pension mentioned in the statement would not only be in respect of one rank but graded as per years of service for retirees in that rank. This is an essential requirement based on the definition of OROP. For example the average pension for a Col with 24 years of service would be based on max and min pensions of retirees in 2013 with that many, i.e. 24, years of service. It would be calculated separately for a Col with 25 years of service, based on max and min pensions of retirees in 2013 with 25 years of service and so on.

If we take actual pensions (or potential pensions, as explained in the table and the text that follows) for 2013 into consideration and do not wander off, right at this stage, into the rather grey area of fixing OROP pensions based on pay-bands (more on that in a subsequent blog-post), we could draw up a table, more to give an idea of how OROP could/should be fixed rather than to provide actual figures. The table, for reasons of simplification, applies to Officer retirees but the concept applies to all ESM. (Please click on the embedded table to obtain a pop-out enlarged view) :

Based on some alarming over-simplifications reported on the blogosphere, as here, it might be useful to keep some things in mind:

*Pensions of older retirees should not be based on those of current retirees or on pay of currently serving personnel if the current retirees/serving personnel are in a lower rank due to denial of time-bound promotion to the next rank on disciplinary or medical grounds.

*In case there is no actual normal retiree in 2013 for a certain rank and service-years combination, the potential pension based on max and min pay of serving persons in 2013 with the same rank and service-years combination could be a logical way to establish the OROP pension as shown.

*In case personnel normally retire, currently, on time bound basis, in a higher rank with the same years of service, then the "parity zones" such as those shown in the table need to apply.

Again, these ideas are subject to verification. That is all the more reason for official thinking on the subject to be placed in the public domain for a meaningful and transparent dialog.

A Letter On OROP Seeking "Widest Circulation"

I came across this in a blog not exactly known for exchange of comments or for discussions. But blogs serve several purposes and can be used in the fashion of  "bulletin boards" for effective dissemination of others' views or ideas.

I cannot, however, vouch for the authenticity of this communication. I have seen a lot of other e_mails purportedly originated from the same source as well as from other functionaries of the same association, all without authentication of any sort. These are just passed on via e_mail, on blogs or linked to in tweets or chatroll posts here and there.

To my mind, an issue deserving to be handled with appropriate seriousness would at least deserve a duly authenticated blog, if not a web-site, regularly updated by people who are not keyboard challenged. That is nowadays the accepted platform for even minor issues. In this case, the welfare of thousands (hundreds of thousands?) of ex-servicemen is involved. A slightly more up to date interface can't hurt the cause.

There was a clamor, from a lot of veterans affected, for details and modalities of OROP implementation to be made public by the Govt and the ESM Associations. But the tables in the above communication are not exactly what would meet that need for transparency or bring smiles of hope to all faces. My immediate reaction was to highlight the most ambiguous of the contents in a shade of appropriate grey. There are notes placed alongside, but these may not be view-able on all platforms so here is a gist of the very serious doubts that the contents raise:

*What is meant by "These can be used to work out" at para 3 of the communication? Is application of a thumb-rule being advocated here? Is that all the ESM associations have been able to work out after all the hype that has flooded the media for months now? I hope not. I'd still like to believe, this is not the full picture and the ESM reps are holding something up their sleeves. But I also have serious misgivings that such a superficial view may actually reflect the real level of reasoning at work. I am firmly of the view there is no room here for a "simplest method to implement realistic OROP". I think a bit of complexity for arriving at an actual OROP would meet the requirements a lot better than individual perceptions of "realistic".

*Why is the term TS being used in the table when it is widely acknowledged, even at the level of services HQs, that use of such a suffix is undignified? It has been officially done away with. I'm sure display of a bit of courtesy on such matters will not be out of place and would be appreciated by veterans whom the ESM associations seek to represent. Apart from that, more importantly, why have separate rows been made for OROP pensions for Col promoted by selection and Col promoted on time bound basis? Everyone knows pensions are the same for both as tabulated in PCDA circular 500.

*Why is the table silent on OROP pension for Lt Col retirees with service more than 26 years? Do the ESM Associations have no view on the required parity of pensions of erstwhile (pre AVS-I) Lt Col retirees with more than 26 years of service with pensions of Col promoted on time-bound basis on completing 26 years of service after implementation of AVS-I?

*Similarly, why does the table say nothing of pension parity of Major retirees with more than 20 years of service with pensions of post AVS-I Lt Col with service of 20 years? Most importantly, where did they get figures for a Major retiring between 01 Jan 2014 and 31 March 2014 with service of 24 years? Was there actually a Major with that many years of service who retired in that period? Ever since 16 Dec 2004, Majors are promoted to Lt Col on time bound basis after completing a service of 13 years. Any Officer who retired with 24 years of service as Major between Jan 2014 and April 2014, as the table in the communication states, might have been one who could not be promoted even on time-bound basis due to reasons of being unfit for time-bound promotion or being of a different cadre altogether. Are the ESM associations seeking to peg the pensions of erstwhile older Major retirees to the pension of such a case?

Earlier on, reps of some of the same ESM associations were speaking of pensions based on actual pay-bands. Now, on the other hand, we see a fairly un-representative table based on some pensions actually drawn, with more questions than answers. There is also the most alarming view, in the communication, that some sort of extrapolation, "working-out" be resorted to on the basis of this most inadequate data. Stake holders can only hope more details of modalities based on systematic logic on the subject would emerge.  

Table Time, Again!

A recent statement in news media by a representative of IESM threw some light on thinking on the ESM associations' and, probably the Government's approach to calculating OROP pensions for older retirees.

The rep spoke of asking for fixation at top of pay band rather than based on the average of the pay band. This makes me feel that the old manner of pension fixation across CPCs, through fitment tables and then fixing minima on older pensions, still governs reasoning on OROP. To my mind a radically new approach is required as OROP is a totally different paradigm.

The statement of IESM rep gives rise to several questions:

*If the OROP pension is to be based on the average of pensions for a rank in the base year, which in turn, as per inference drawn from the statement, is to be calculated on the average of pay (for that specific rank) in the pay band, then how would the element of years of service be taken into account? Let us not forget, post 2006, there is no pro-rata reduction in pension. If we calculate on the basis of the average of  pay in pay band for a particular rank, the pension will be the same regardless of number of years of service (from 20 to 33). Also, as the pay band remains constant, the average of pay in the pay-band remains constant. So how is it expected to increase from year to year for which an annual review is being sought?

*The same logic would apply even if top of the pay in pay band was used. How would variation in number of years of service  and variation from year to year be accommodated in such a pay-band based pension calculation?

*Are we to infer that top of the pay-band would have been reached in the base-year for someone with a certain number of years of service? This is another way of asking the same old question as to what is the average of pensions? Average of pensions actually paid in base year or of pensions based on pay in pay band? Or are they going to see the highest pay and the lowest pay drawn by a certain rank with a certain number of years of service, even if not retiring in the base year, and then calculate the average pension for that "rank_years of service" combination?

Now, regardless of the way they decide to calculate the OROP pension, there are rough indications available how it would impact pensions after OROP is implemented. Firstly, let us go back to the GOI letter of 2008 that spelt out how pensions would first be consolidated. Would that be the case here? Considering it is the pension in the base year that is to be a benchmark for earlier pensions, there is a need to skip the consolidation bit. Let us not forget it is not a transition from one CPC to another. The only parallel could be the application of the minima to older pensions. Here the ESM rep's statement and the Govt statement appear to suggest that instead of the minimum of pay in payband specified in 2008, as embedded below, it will be the "average" pension in base year based on average of pay in pay band.

Min of Pay In Pay Band Stipulation : GOI Letter Of 2008


 

PCDA circular 500 described this manner of fixing the minimum pension as modified parity as shown here :


 

Whether or not that will be the manner in which OROP pensions will be calculated remains to be seen. But it is not difficult to generate figures based on pay in pay band considerations and arrive at different, purely hypothetical, figures for OROP for some relative comparisons as shown in the following table :

 

Even with these hypothetical figures, it is easy to see how the enhancement in pensions could vary from one manner of fixation to another. The actual amounts may differ but the range of variation in percentages could be in the same region.

 

The above, purely speculative, exercise can only serve to indicate what other surprises may be in store. It may not be out of place for the Government and ESM Associations to bring everyone on board by sharing the precise modalities that the OROP implementation letter is to be based on. Perhaps inviting feedback in a transparent manner could resolve issues faster than keeping the cards close to their chests.