On Friday, as Union Minister Piyush Goyal, who is serving as the interim Finance Minister, announced various proposals of the government during the interim Budget speech, he also announced a new pension scheme for workers in the unorganised sector. Workers in the unorganised sector make up to 90% of India’s workforce. The Pradhan Mantri Shram Yogi Maandhan, Goyal said, will cover workers earning up to Rs 15,000. He also added that the Centre allocated Rs 500 crore for the scheme, which is expected to benefit 10 crore workers.
According to the scheme, which will be implemented in the current year, workers will receive a pension of Rs 3,000 per month after the age of 60. They will also have to contribute a nominal amount while they are working. “An unorganised sector worker joining pension yojana at the age of 29 years will have to contribute only Rs 100 per month till the age of 60 years,” the finance minister said. “A worker joining the pension yojana at 18 years, will have to contribute as little as Rs 55 per month only.” The fine print of the scheme, or the minimum period for which contributions have to be made, are not yet available.
‘Repackaged version’
Economist Jean Dreze said that the new scheme seemed to be a “repackaged version” of the Atal Pension Yojana. The Atal Pension Yojana got no mention in Goyal’s Budget speech or Finance Minister Arun Jaitley’s Union Budget in February 2017. It was launched in March 2015 by the Bharatiya Janata Party-led government for workers in the unorganised sector. The scheme was also based on contributions. Under the 2015 scheme, workers were entitled to receive a minimum pension of Rs 1,000 and a maximum of Rs 5,000. The government was also to contribute 50% of the beneficiary’s contribution up to an annual limit of Rs 1,000 for a period of five years.
However, two years after the scheme was launched, the government went silent on it as the scheme had only 42.8 lakh beneficiaries till February 2017. Out of these beneficiaries, 48% had opted for the lowest pension category of Rs 1,000, according to the Pension Fund Regulatory and Development Authority, the government’s pension regulator. Additionally, the scheme had done only marginally better than its predecessor, the United Progressive Alliance government’s Swawlambhan scheme.
“The Atat Pension Yojana was so unattractive that very few opted for it,” Dreze said. “A lot in this new scheme will depend upon how serious the government is about implementing it. We are still not sure if the Atal Pension Yojana will be subsumed under this new scheme.” He also pointed out that under the new Budget, Rs 300 crore each had been reduced from the old age and widow pensions that fall under the National Social Assistance Programme, which did not take contributions from beneficiaries.
In December 2017 and 2018, 60 economists wrote to Jaitley, with a list of “urgent priorities” which included increasing the pension rate from Rs 200 to Rs 500 under the National Old Age Pension Scheme. The old-age pension scheme falls under the National Social Assistance Programme. The rate had remained unchanged since 2006. The economists also added that the government was “extraordinarily stingy” with its funding of old-age pensions.
Sustaining contributions
In November 2017, the BJP-led government announced that it would roll out a social security code which would consolidate 15 existing laws on pension, disability and life insurance as well as maternity, medical and unemployment coverage. The government claimed that this would cover workers in the organised and unorganised sector. This draft code also worked on the basis of contributions from workers and their employers. Under the code, workers would have to contribute between 12.5% and 20% of their monthly wages if they did not belong to the below-minimum wage income category. However, several labour rights activists and workers raised concerns about paying for social security.
The time for contributory pensions has not yet come for India, said economist and activist Dipa Sinha, who also agreed with Dreze and called the new scheme a “rejigged Atal Pension Scheme”. She added that the contributory model originated in Europe where most of the employment was already formalised.
“Even Rs 100 is a lot of money for poor people to commit for monthly contributions,” Sinha said. “It is not feasible for them to think long term for the sake of Rs 3,000 at the end of it. What will the value of Rs, 3000 be when they turn 60? They are more concerned with current consumption, for instance how they will pay for food and other necessities. In India, the share of older people is going up and this is why the issue of old-age pension is very urgent.”
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