The Government on Monday accepted in principle the “one-rank, one-pension” for defence forces, a long-standing demand of ex-servicemen. At a meeting with ex-servicemen recently, Congress Vice-President Rahul Gandhi had assured them of backing their long-standing demand.

Announcing this in his speech before introducing the interim Budget in Parliament on Monday, Finance Minister P Chidambaram said the Government had decided to walk the last mile and close the gap for all retirees in all ranks. He said the one-rank, one-pension principle will be implemented prospectively from financial year 2014-15.Justifying the move, Chidambaram said “We need a young fighting force, we need young jawans, and we need young officers. We also need to take care of those who served in the defence forces only for a limited number of years.”

While the exact numbers are not available, the Government has budgeted ₹45,500 crore as pension and other retirement benefits in the Revised Estimates during the current year. This is the same level as what was budgeted for the current year. For the next year (2014-15 fiscal), the Government has budgeted ₹50,000 crore as pension and other retirement benefits for the defence sector. However, it is not clear whether this increase of ₹4,500 crore is on account of implementing one-rank, one-pension alone or also due to other reasons.

Briefing newspersons, Chidambaram said the Defence Ministry had sought ₹500 crore for implementing the scheme. He added that any increase in fund requirement to meet the scheme could be met from the increase in Budget allocation for Defence Ministry.

The Finance Minister also announced a 10-per cent increase in budget allocation for defence to ₹224,000 crore during 2014-15 from ₹203,672 crore in Budget Estimate 2013-14.

Pointing out that the increase in the defence budget was in line with what is happening in countries like Russia and China, Rahul Gangal, Principal, Roland Berger Strategy Consultants, felt that the increase will also help to address gaps in capability by meeting both obsolesce linked replacement demand and demand for new systems.

(This article was published on February 17, 2014)
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