The rising cost of the defence pension bill

THE Union Budget 2020-21 highlighted the rising cost of the defence pension bill. While the defence outlay of Rs.4,71,378 crore is 9.37 per cent higher than the budget estimates of 2019-20, the allocation for defence pensions, at Rs.1,33,825 crore, showed a 19.4 per cent increase from the previous year’s allocation of Rs.1,12,080 crore. The defence budget is split into three major heads—revenue (moneys used in maintaining the weapons inventory, pay and allowances, infrastructure, and recurring expenses), capital outlay (money to modernise/ procure new weapon systems) and defence pensions. The allocation for procurement of military hardware at Rs.1,13,734 crore is lower than the expenses on pensionary benefits. The outlay for maintenance of the weapons inventory, pay and allowances, infrastructure, and recurring expenses is Rs.2,09,319 crore.

The periodic increase in salary, pensions and other benefits, coupled with the ever-increasing pool of manpower has meant that 59 per cent of the Ministry’s expenses goes towards servicing the pay and allowances of its 1.43 million uniformed personnel, 3,98,433 defence civilians, and 3.24 million defence pensioners. The personnel below officer rank (PBOR), constitute the biggest pensioner segment, accounting for 77 per cent of pensioners and 49 per cent of the total number of people funded through the MoD’s budget. The allocation to meet the pensionary liability of retired defence pensioners amounts to 4.4 per cent of the Central government expenditure and 0.6 per cent of India’s gross domestic product.