Pension Bills Have Surpassed Salary And Wages Bills Of Centre And Three States, CAG Data Says

The pension expenditure was higher than the salary and wages expenditure of the central government and three states (including Gujarat) during the 2019-20 fiscal year, according to official data.

This comes as the Old Pension Scheme (OPS) has been a prominent election promise in the Himachal Pradesh and Gujarat assembly elections, even sparking debates outside of the political sphere.

Two states ruled by the Congress party (Rajasthan and Chhattisgarh) have already decided to implement the OPS, and the party has promised to restore it in Gujarat and Himachal Pradesh if it comes to power.

During the 2019-20 fiscal year, the Comptroller and Auditor General of India (CAG) reported that the Centre's total committed expenditure was Rs 9.78 lakh crore, which accounted for 37 per cent of its total revenue expenditure of Rs 26.15 lakh crore. This expenditure included Rs 1.39 lakh crore on salaries and wages, Rs 1.83 lakh crore on pensions, and Rs 6.55 lakh crore on interest payments and debt servicing.

“The Committed Expenditure in respect of the Union Government consists of 67 per cent on Interest Payment and Servicing of Debt. The remaining 19 per cent and 14 per cent expenditure constituted the expenditure on Pensions and Salary and Wages respectively. It is apparent that expenditure on pensions is more than the expenditure on salaries and wages,” reads the CAG report titled ‘Union and State Finances at A Glance’ for 2019-20, Indian Express reported.

In 2019-20, the last year for which comparable data for the Centre and states is available, the Centre's pension bill was 132% of its expenditure on salary and wages. This was just before the Covid-19 outbreak in India in 2020.

During 2019-20, the pension bill exceeded the salary and wages expenditure in three Indian states: Gujarat, Karnataka, and West Bengal.

In Gujarat, the pension bill (Rs 17,663 crore) was 159 per cent of the expenditure on salary and wages (Rs 11,126 crore).

In Karnataka, the pension bill (Rs 18,404 crore) was 126 per cent of the expenditure on salary and wages (Rs 14,573 crore). Similarly, in West Bengal, the pension bill (Rs 17,462 crore) was 103 per cent of the expenditure on salary and wages (Rs 16,915 crore).

The data indicates that the combined pension bill of 30 states and Union Territories, for which comparable data exists, was Rs 3.38 lakh crore in 2019-20. This amount represented 61.82 percent of their combined expenditure (Rs 5.47 lakh crore) on salary and wages. In five states – Uttar Pradesh, Bihar, Maharashtra, Tamil Nadu and Odisha – the pension bill accounted for more than two-thirds of their expenditure on salary and wages.

The government's committed expenditure on pensions, salary and wages, and interest payments and debt servicing is a key component of its budget.

A higher committed expenditure means the government has less flexibility to determine how revenue expenditure will be used.

In 2019-20, the total committed expenditure of all the states was Rs 12.38 lakh crore, almost half of their combined revenue expenditure of Rs 27.41 lakh crore.

The expenditure on pensions in Rajasthan was Rs 20,761 crore, 42.7 per cent of its expenditure on salary and wages.

In Chhattisgarh, the pension bill was 30.62 per cent of salary and wage expenditure, and in Himachal Pradesh, it was 47 per cent of salary and wage expenditure.

The combined pension expenditure of all states and union territories doubled to Rs 3.45 lakh crore in 2019-20 from Rs 1.63 lakh crore in 2013-14, according to the latest edition of the Handbook of Statistics on Indian states, released by Reserve Bank of India on 19 November.