By Bibhudatta Pradhan/Bloomberg
New Delhi: The communist allies of the ruling coalition at the centre asked the government to put on hold the appointment of managers for supervising pension funds of federal government employees, even as the regulator said only state-run companies would be eligible.
The funds should be placed with the state-administered Employees’ Provident Fund Organization, until an agreement is reached between the allies and the government on a pension- regulation bill, the communists said in a 18 May letter to Prime Minister Manmohan Singh. The regulator on 11 May invited applications from pension fund managers to look after the savings of federal government employees who joined service after January 2004.
“In the name of an interim step, some of the objectionable features of the bill are going to be put in place,” four communist parties said in the letter released to media on 20 May. “We wish to register our strong disapproval of this move.”
The Pension Fund Regulatory & Development Authority Bill has been pending parliament’s approval since 2005, because the communist parties are opposed to privatizing pension funds.
Government has clarified that only state-owned companies, public finance institutions having more than 51% government equity may apply for the post of pension fund managers under new pension system.
“No foreign or private firm would be eligible to apply for the pension fund business,” the government said in a statement on 20 May. The eligibility criteria for fund management is “in accordance with” said the parliamentary panel report that examined the pension bill.
The last date for submission of applications for pension fund managers is 25 May, the statement said.
The new pension plan requires government employees who started service in January 2004 to contribute a part of their salaries to the pension fund. The government will contribute a matching amount and continue paying the pension of employees on the rolls before 2004.
The new plan is aimed at cutting expenditure and narrowing the budget deficit. Subscribers will have the option of investing part of their funds in equity and equity-linked mutual funds.
India’s pension bill is expected to rise to Rs350 billion ($8.15 billion) by 31 March, 2010, from Rs289 billion in 2006, finance minister P. Chidambaram said in January.
Prime Minister Singh’s Congress party-led coalition government depends on the four communist parties for its parliamentary majority. The 14-party coalition and its allies have a governance agenda known as the Common Minimum Programme, on which policies are based.