Why old pension scheme will make fiscal situation unstable? Chief Economic Advisor tells

New Delhi, Jan 31: Amid some states restoring the Old Pension Scheme (OPS), Chief Economic Advisor V Anantha Nageshwaran on Tuesday said that it makes the fiscal situation unsustainable or unstable.

"We need to defer to the views of experienced former policymakers like Montek Singh Ahluwalia, who have already opined on this matter. Reserve Bank of India (RBI) has also expressed its concern about OPS. OPS may temporarily save cash flows for the state governments, but obviously, it postpones the problem to a future date and makes the fiscal situation unsustainable or unstable," he told ANI in an exclusive interview.

Rajasthan, Chhattisgarh and Himachal Pradesh, ruled by Congress, have restored the OPS while there is a growing demand for the restoration of it in Maharashtra, Punjab, Tamil Nadu and a few other states.

Earlier, former Planning Commission chief Montek Singh Ahluwalia had called the OPS a recipe for financial bankruptcy. "I certainly share the view that this move is absurd. It's a recipe just for financial bankruptcy. The big advantage of those who push the move is that bankruptcy will come 10 years later. Economists have nothing to say, the system must prevent political parties or those in power not to take steps that will inevitably lead to a financial disaster," The Times of India quoted Ahluwalia as saying.

Similarly, former Reserve Bank of India (RBI) Governor Raghuram Rajan had warned against moving back to the OPS as it might build liabilities for the future.

The Old Pension Scheme was scrapped by the Union Government in 2004 and it was replaced with the New Pension Scheme. Under the old scheme, government employees used to get a fixed monthly income post retirement. The pension was paid based on their last drawn salary. A fixed 50 per cent of last drawn salary along with dearness allowance at retirement or average emoluments earned in the last ten months of service were paid to the government employees after their retirement. One advantage was that dearness allowance was linked to inflation and that increases very often and that usually was revised twice a year.