India announces pension overhaul

New Delhi

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Three million Indian army veterans won a decades-long battle yesterday to change the way their pensions are calculated, as the government bent to protesters’ demands and announced it would overhaul the controversial scheme.

India’s armed forces personnel, who typically retire earlier than other public sector workers, have mounted fierce opposition in recent months to the current pension scheme, which is based on their salary when they retire.

They argue this leaves them vulnerable to inflation eroding their livelihoods and say it is unfair that a soldier who retired recently should receive a larger pension than one who left service earlier.

Under the newly agreed ‘One Rank, One Pension’ (OROP) deal, ex-servicemen will now receive a pension based on 2013 salaries, to be re-fixed every five years -- irrespective of when they retired. 

“The main argument for OROP is that the defence personnel retire early and thus are not able to get the benefits of serving till normal retirement age,” Defence Minister Manohar Parrikar told a press conference in New Delhi.

“Despite the huge fiscal burden, given its commitment to the welfare of ex-servicemen the government has taken the decision to implement OROP.” 

The scheme will cost between 80 billion rupees and 100bn rupees (US$1.2bn - $1.5bn), he said. Military pensioners will receive arrears dating back to July 2014.

India has one of the world’s largest armies, with around 1.32 million active personnel and 2.14m reservists.

Retirement ages vary by rank, ranging from 56 to 62 years of age, according to the Indian Army website.