New Delhi: The Union Cabinet on Wednesdayapproved retention of percentage-based system for calculating disability pensions implemented after the 6th Central Pay Commission recommendations, rejecting the 7th pay panel recommendation for slab-based system.
The decision will benefit both existing and future defence pensioners and entail an additional expenditure of approximately Rs 130 crore per annum, an official statement said.
The benefits of the modifications will be applicable from January 1, 2016. With this, the annual pension bill of the Centre is expected to be around Rs 1,76,071 crore.
"The Cabinet chaired by Prime Minister Narendra Modi approved retention of percentage-based regime, which the 7th CPC recommended to be replaced by a slab-based system," the statement said.
Finance Minister Arun Jaitley, who also holds the defence portfolio, said: "There was a decision on disability pension, in which there was an alternative slab system. There was a representation regarding it which said it was not sufficient compensation for those who get disabled during service, and there was also an issue of parity with the civilian employees."
"The Pay Commission reconsidered it and the parity they expected has been restored," he said.
The issue of disability pension was referred to the National Anomaly Committee by the Defence Ministry after representations from the defence forces to retain slab-based system, as otherwise it would have resulted in reduction in disability pension for existing pensioners and reduction in disability pension for future retirees.
On the defence pensions, the Minister said there will be two options for the retirees.
"The pre-2016 pensioners will be given two options -- one, they can take pension on the basis of 2.57 per cent multiplier. Second, a pay fixation formula given by the pension committee."
The official statement said the modified formulation of pension revision will entail an additional benefit to pensioners and additional expenditure of approximately Rs 5,031 crore for 2016-17, over and above the expenditure already incurred in revision of pensions as per the second formulation based on fitment factor.
It will benefit over 55 lakh pre-2016 civil and defence pensioners and family pensioners.
"Pensions of pre-2016 pensioners were revised as per the second formulation, multiplying existing pension by a fitment factor of 2.57, though the pensioners were to be given the option of choosing the more beneficial of the two formulations as per the 7th CPC recommendations," the statement said.
The Minister said there were other concerns raised by the forces that the government had since accepted.
"There are three concerns which government has accepted -- two before the Cabinet and one an executive decision...," the Minister said.
"One relates to the pay matrix -- increasing it from 24 to 40; second is an index of rationalisation for Colonels and Lieutenant Colonels from 2.57 to 2.67; and third, pay protection to those who are protected from Brigadier rank upwards because they lost the military service pay. Obviously you can't get promoted and be paid less," he said.
The services had demanded that defence pay matrix should be brought in sync with the civilian pay matrix. The defence pay matrix in the 7th Pay Commission has only 24 pay levels, while on the other hand, the civilian pay matrix has 40 levels.