Commutation Deduction from pension for 10 Years : Appealed CBIC Pensioners

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The gross injustice faced by the central government pensioners has been brought to the knowledge through a representation by Pensioners of Central Board of Indirect Tax & Customs, on behalf of their recognised organisation “All India Pensioners Association of CBIC” for due redressal/justice as a recovery is being made from them for 15 years with enriched interest against the commuted pension of 8.194 years.

The period of 15 years for restoration of commuted value of pension was fixed long back keeping in view the then rates of interest. Now, the rates of interest have been lowered down drastically and already become almost half or even less in comparison to the old period. Not only the government but LIC has also lowered the interest rates but the period for restoration of commuted value of pension is still the same with old higher interest enriching the government by 18.6%.

The formula of commutation of pension, a factor of 8.194 is used for its calculation. Earlier it was 9.81. It means a pension equivalent to 8.194 years is paid in advance to the pensioners on commutation whereas recovery is made for 15 years at uniformly higher enriching interest rate.

You may be surprised to note that, the recovery becomes around double of the commuted pension enriching our government despite being a welfare state. As far as life expectancy is concerned, it has now become over 70 years in India and continued the same for many years in comparison to earlier less than 60 years. It is also worth mentioning that the government servants have a much higher life expectancy than the National average and it is 77 years in India as per WHO statistics.

Keeping in view the lower interest rates of the present era, the interest on commuted value of pension is duly recovered within 10 years. Thus, excess recovery is taking place for 5 years from the poor pensioners.

The period of 15 years for restoration of the commuted value of pension is no way justified in the present scenario when the cost of living and daily expenses have also enhanced tremendously putting the pensioners in high trouble. The Govt. of India has already modified several rules and regulations in the interest of common citizens to provide better facilities to the public. Accordingly, it is a firm belief of the Association that old age rules relating to the restoration of commuted pension value of pension also need modification and amendment.

Keeping in view that it was formulated on the basis of old-time interest rates, it is required to be formulated on the basis of the present interest rates which are expected to be lowered more in future with the passage of time. No need to say that old interest rates are just double or even more in comparison to the present ones. Accordingly, the period for restoration of commuted pension is required to be lowered to not more than 10 years from 15 years. It is no way expected that a government of a welfare state would charge enriching interest from its senior citizens for recovery of commuted pension value of pension particularly when they are being paid half percent interest more on their deposits by the government.

On this count, the pensioners are entitled to pay at least half percent less interest for recovery of commuted portion of pension than the prevailing lower rates of interest of present time.

Our country being a welfare state, no insurance cost is also required to be added in the recovery, particularly keeping in view the lowering death rate day by day in comparison to old times. Before the age of 70 years, only a few demises happen, if a study is made regarding central government pensioners in the present era.

Our welfare state requires us to take a decision as an act of goodwill to pensioners and to extend them some measures of relief in the evening of their lives in this regard. On one hand, senior citizens have been given special status by the government but on the other hand, recovery of commuted pension is being made from them at a very high interest rate by the government like an enriching business house.

After the implementation of 6th CPC recommendations w.e.f. 01.01.06, the commutation factor has been downgraded from 9.81 to 8.194, thereby reducing the commuted amount by 16.5%. The prescribed rate of interest has also been enhanced drastically which is not in consonance with the low interest regime of today. The prescribed rate of interest has been enhanced with a jump of 68% even in this low interest regime.

It is also worth to point out that the interest charged on various govt advances like House Building Advance, Car Advance, Festival Advance, Marriage Advance etc. is simple interest whereas interest charged on recovery of commuted pension is compound interest. It is reiterated that the recovery period would be 10 years or even less, if justified interest on lower rate is charged keeping in view the present economic scenario. It will no way be more than 10 years, even if insurance factor is also added to it as per the prevailing death rate.

The Fifth Central Pay Commission also recommended reduction of the period of recovery of commuted pension but nothing was done by the government. The State Governments like Kerala, Madhya Pradesh, Orissa, Gujarat etc. have already reduced the period of restoration for full pension and the High Court of Haryana & Punjab has already given stay on further recovery from the pensioners in this matter (copy of some stay orders are enclosed for your kind reference). Sixth Pay Commission also recommended periodical revision and review of the commutation table keeping in view the interest rates and mortality rate but nothing done by the government.

Also, it was replied to unstarred parliament question no. 2317 (to be answered on 21.12.2022) that the matter to reduce the restoration period had been referred to the Ministry of Finance, Department of Expenditure on 03.10.2022. After it, neither the government issued any communication nor the Association came to know about any response on the issue. It is, however, clear from it that the matter has gravity and justification, that’s why the matter was referred to the Department of Expenditure by the government.

It is also worth to mention that the due consideration should also be given to the fact that the poor pensioners are paid no allowance, are given no benefit of annual increment and also not given benefit of any other facility/amenity like rent free accommodation, LTC benefit, reimbursement of telephone or newspaper bill etc. They are also paying income tax on their pension as per the prevailing law/rules.

So, it is no way justified in a welfare state of ours to charge an enriching interest and insurance amount from them in lieu of a commuted pension. One may say that it is an optional scheme. Yes, it is true but it is also true that only beneficial options are chosen when more than one option is available to any individual. It is not only a natural process but various courts including the Apex Court have also established this truth. This process falls not only under natural justice but it has also become the rule of law.

The Pensioners Association has appealed to the Govt to consider the matter sympathetically to reduce the period for restoration of commuted value of pension to 10 years or less from 15 to grant justice to the pensioners fraternity.