Impact of the OROP Judgment on Policies and Pensions

With the SC's OROP Judgment, the government’s balancing of pensions within defence policy continues.

On March 16th, 2022, a two-Judge Bench comprising Justices D.Y. Chandrachud and Surya Kant upheld the Union Government’s One Rank One Pension (OROP) policy. Born out of the smokescreens of election promises and Executive documents, fundamental differences in how stakeholders viewed the policy are what the OROP case hinges on. This conflict shapes how India’s 26 lakh defence pensioners will be impacted by the pensions allocated under OROP.

OROP conceptually addresses the generational difference in pensions received by defence personnel. According to the petitioners, persons of the same rank who have served for the same amount of time should receive the same pension, irrespective of when they retire. This isn’t how the policy was ultimately executed—an administrative decision that the Court ruled in favour of. “One Rank One Pension as it was originally envisaged is not happening,” said Balaji Srinivasan, Advocate-On-Record appearing for the Indian Ex Servicemen Movement & Ors. “Now, we see a clear shift towards a different policy: ‘One Rank Many Pensions’.”

In Indian Ex Servicemen Movement & Ors v Union of India & Ors, the Bench ruled that pensioners of the same rank from India’s Armed Forces were not legally entitled to the same pension. It declared the policy constitutionally valid, and not in violation of Article 14 of the Constitution of India, 1950, as alleged by the petitioners. The Court directed the Union to execute the pending five-year OROP re-fixation from July 1, 2019. Pending arrears are to be paid to the pensioners in three months.

During the proceedings, Chandrachud J stated that Courts typically do not intervene with Executive policy, unless they infringe on Constitutional rights. Yet, the Court’s resistance to intervening impacts the policy itself. With the Judgment, the government’s balancing of pensions within defence policy continues.

“Ultimately, we respect the opinion of the highest judicial authority in the country. It will not affect how the Forces perform their duties,” says a retired officer affiliated with the Indian Ex Servicemen Movement. “But, there is no question that a verdict like this affects the morale of many retirees who have done a tremendous amount to serve India.”

Why Are the Petitioners Protesting the Union’s OROP Policy?

Pensions are computed as a proportion of a worker’s last drawn salary, which is based on a pay scale. The Pay Commission determines government pay scales in India. It revises and increases pay scales on a decadal basis, as well as pensions. According to a government policy brief on OROP, defence personnel who retired before pay scales were revised would receive a smaller pension. Once the scales are revised, personnel of the same rank who served the same amount of time would naturally receive a higher pension

OROP aims to address this issue. Within a specific time period, the State calculates pensions for different ranks. After this, these enhanced benefits are to be gradually passed on to all retirees of that rank, irrespective of when they retired.

According to the 2011 Koshyari Committee report, OROP schemes were practised until 1973, after which they were revoked by the third Central Pay Commission. On the basis of the Koshyari Report’s recommendations in 2011, as well as protests by the defence pensioners, erstwhile Finance Minister P. Chidambaram announced the government’s acceptance of the principle of OROP in 2014. The policy was ultimately brought to life by the NDA government post its landslide victory in the 2014 General Elections—part of its election plank centred around its promise to implement the OROP and support India’s Armed Forces.

How the Union designed and executed OROP has become the bone of contention for the petitioners: as explained in SCO’s detailed OROP Judgment summary

Promotion policies in the military resulted in pensioners of the same rank receiving different pensions. These differences were compounded by the calculations the OROP uses. The base salary upon which pensions were calculated differed for pensioners who retired before 2014 and those who retired after. This results in pensioners of the same rank receiving different pensions. It may also mean that pensioners of lower ranks potentially receive higher pensions compared to those of higher ranks. “If the inequality already exists [at the base salary level], then that difference will continue until even when the pension rates are revised after five years,” explains Mr. Srinivasan. “As the difference grows, the person who retires before 2014 will be progressively discriminated against.”

The petitioners challenged the policy at the Court citing the violation of Article 14. The Court upheld the existing system as constitutional on March 16th.

Balancing People and the Purse

₹1.45 lakh crores. That’s how much more the government says it would cost the exchequer if it paid pensioners using comparable base salaries. While defence budget allocations have expanded by 30% since FY2018-19, these additions, if taken at face value, could add to a pre-existing pensions bill. The Union says that it has already disbursed ₹32,385 crore worth of pensions over six years under the OROP.

“In the defence budget, pension is a major component, accounting for about 23% of the Ministry of Defence’s allocations,” says Dr. Laxman Kumar Behera, Associate Professor at JNU’s Special Centre for National Security Studies and author of India’s Defence Economy. “Together with salaries, it consumes over 60% of the overall defence spending.” In the 2022 Union Budget, out of the ₹5.25 lakh crore allocated to defence, ₹1.19 lakh crores were allocated to paying pensions. The Court addressed these figures in the Judgment, noting that the Union may be focusing on other strategic issues instead.

“The share taken up by pensions leaves a smaller share for equipment modernisation and maintenance of the existing weapons,” adds Dr. Behera, a cause for concern given security tensions on India’s northwestern and northeastern flanks. Despite this, given increased security threats, the government has largely prioritised military modernisation with modernisation expenditure increasing by 60% between FY 2018-19 to FY 2022-23. 

There is also the question of the logistical implementation of the policy. “It would be challenging to revise the pension of all the existing pensioners,” says Amit Cowshish, former Financial Advisor (Acquisition) at the Ministry of Defence, who also handled defence pensions during the 1980s. “This is especially when trying to bring pensions for  personnel who retired from the same rank with the same length of service at par with the highest pension sanctioned in the previous year, which is what the petitioners’ demand seems to be. Developing flawless algorithms for revising the pension of more than two million pensioners every year without creating any inter se anomalies is an enormous undertaking.”

The bottom line is that the government may simply not be in a position to support retirees on an equal footing within the time frames that they desire—a sentiment the Court may have bought into, as it reserved the Union’s right to make policy decisions on its own terms. In the Judgment, the Bench notes that “an increased reliance on Judges to solve matters of pure policy diminishes the role of other political organs in resolving contested issues of social and political policy, which require a democratic dialogue.” 

“We approached the Court, with the plea that OROP cannot have a ‘cut off’ date [of 2014]. The cutoff date undoes the scheme and is therefore discriminatory and arbitrary,” rebuts Mr. Srinivasan. “This aspect of the case is brushed aside by recording a finding that there is no legal definition of OROP.” Mr. Srinivasan is referring to India’s 26 lakh defence pensioners—which grows by 60,000 retirees on an annual basis. “

Even within these pensioners, some may stand to lose out more than others. 

“When looking at the Indian Army specifically, commissioned officers comprise only 4% of the forces. The remaining 96% is made up of soldiers,” says the retired officer. As of 2021, the Army is composed of 53,569 officers and 11,35,799 soldiers, the Navy of 11,100 officers and 63,515 sailors, and the Air Force of 12,048 officers and 1,38,792 airmen.

Soldiers, seamen, and airmen are paid on a significantly lower scale compared to commissioned officers in their respective services. As a result, the pensions they receive based on their salary bands are smaller compared to commissioned officers—OROP’s current execution may affect how much pension they receive.

“These are the people who stand on the borders, who move from one corner of India to another,” says the retired officer. “They stand to lose the most from pension disparity [due to OROP] and from waiting until the pension rates are revised after five years. We agitated largely on behalf of these jawans and military widows, to ensure they are paid comparably.”

So, if the OROP policy costs the Union so much, then why popularise the idea of it all? “Of course, there would have been some additional [fiscal] burden had the SC judgement gone in favour of the petitioners,” adds Dr. Behera. “But, had the cost of implementation of OROP been a major consideration for the government, it would not have implemented it in the first place.” 

The contest over how OROP is envisioned as a policy lies at the heart of this case. This shift in public policy marked by the Judgment will have bearing on how India’s public sector retirees are compensated for their services in the future. “Ultimately, it is a soldier who lays down their life for India’s security,” says the retired officer. “I wholeheartedly respect the SC’s Judgment. But, if we start counting chips of ₹2,000 when it comes to compensating soldiers fairly, it really hurts.”