Even if Agnipath is scrapped, India needs tough reforms to cut ballooning defence pensions

The mounting defence pension burden lingered until Agnipath came in 2022. But any steps to cut pension costs now will take 15 years to make an impact as retiring Agniveers reduce annually

LT GENERAL PRAKASH MENON

Congress leader Rahul Gandhi’s letter to President Droupadi Murmu on the “discriminatory” Agnipath scheme shows its importance in this Lok Sabha election. The BJP government introduced the scheme in 2022, where soldiers enrolled for four years are christened as Agniveers. Political parties across the spectrum have held differing postures on the scheme.

The Congress’ election manifesto stated that the party would “abolish the Agnipath programme and direct the Armed Forces (Army, Navy, Air Force and Coast Guard) to resume normal recruitment to achieve the full sanctioned strength”. The BJP manifesto, on the other hand, maintains that the four-year enlistment programme will benefit a large section of the young and employable population. It has also stated that it is open to changes in the scheme after a review conducted by the Services. In the psychological framework of the electoral campaign, the issue is dovetailed within the larger issue of significant unemployment at the national level.

What has not been highlighted in the Agnipath debate is that the primary driver of the scheme is an attempt to reduce the burgeoning pension payout that has a deleterious effect on military modernisation due to the resultant reduced availability of funds. The positive payoffs of the scheme cited by the government include strengthening the connection between society and the military, instilling nationalism among the youth, reducing the age profile, and providing an opportunity for the youth to fulfil their aspiration of serving in the Armed Forces.

Also read: Agnipath scheme holds the key to a stronger army. The only hurdle is selection process

Pension issue left unaddressed for years

Warning bells about rising defence pension expenditure have been ringing for decades and long before the higher-costs-involving One Rank One Pension (OROP) scheme was implemented. The Kargil Review Committee Report, for instance, said in 1999: “the Army pension bill has risen exponentially since the 1960s and is becoming an increasing burden on the national exchequer. Army pensions rose from Rs. 1568 crores in 1990-91 to Rs. 6932 crores (budgeted) in 1999-2000, the equivalent of almost two-thirds of the current Army salary bill.” Read this article in ThePrint about India’s rising defence pension bill. In the interim budget for 2024-25, 30 percent has been allotted for pay and allowances, 22.7 percent for defence pensions, and 27.6 percent for capital outlay meant for the modernisation of the forces.

Over the past couple of decades, various solutions have been proposed at different forums to contain defence pensions expenditure (See Appendix A of Takshashila Discussion Document). None of these solutions have come to fruition. In August 2017, these solutions came up for consideration before the Standing Committee on Defence as part of its 33rd report to the Lok Sabha titled ‘Resettlement of Ex-Servicemen’. The proposal was for lateral induction of serving military personnel into CAPFs after seven years of colour service in the Armed Forces. But it did not find favour with the Ministry of Home Affairs (MHA).

Specifically, the MHA argued before the Standing Committee that lateral induction into central/state police services was undesirable because of encultured attitudinal differences toward the use of force and the advanced age of retirees to their effectiveness in police forces. The argument regarding attitudinal differences was blind to the malleable nature of human agency. The age factor after seven years of service was overhyped.

In September 2019, the Takshashila Institution, Bengaluru, a public policy think tank, published a Takshashila Discussion Document titled ‘A Human Capital Investment Model for India’s National Security System Containing India’s Burgeoning Defence Pension Expenditure’.

The document noted: “India’s burgeoning defence pensions expenditure is unsustainable and begs immediate action. Starting with the Kargil Review Committee, many solutions have been mooted over the last two decades to address this problem but none of them have fructified. Meanwhile, the expenditure has ballooned after the implementation of the One Rank One Pension (OROP) scheme. In this paper, we propose that the solution of lateral movement of armed forces personnel into the national security system has significant potential to contain the defence pensions expenditure. We conceptualise a model to operationalise the lateral movement solution. We also estimate that the government can achieve savings worth a net present value of ₹1.2 lakh crores if this model is implemented”.

The model addressed most of the concerns of the MHA and expanded the coverage to all departments of government service where common skills could be identified. It addressed the burgeoning pension issue and also catered to maintaining the functional efficiency of the Armed Forces and other agencies of the government that were to absorb persons after they spent five to six years in the military.

Also read: Tale of 2 Agniveer suicides and India’s unemployed. ‘I can die even for 4-day uniform’

If not Agnipath, then something else

The issue of the burgeoning defence pension remained unaddressed until the Agnipath scheme was announced in 2022. Notably, whatever steps are now taken to reduce the pension outgo will have their effect only after 15 years when the quantum of retiring Agniveers per year would reduce. Until then the pension bill will continue to rise.

Politically, the main argument against the Agnipath scheme is that it deprives most Agniveers of a life-long government employment followed by pensions. From the Armed Forces’ point of view, there were apprehensions about its impact on military effectiveness, a value that should never be compromised. It was opined that the military apprehensions should find their place in the review of the scheme and should shape the changes that would be politically approved.

On 24 May, National Security Advisor (NSA) Ajit Doval, while delivering the Rustomji Memorial Lecture at Vigyan Bhavan in New Delhi, mooted the idea of integrating CAPFs on the lines of the Joint Theatre Commands in the Armed Forces. This idea of integration could be taken further if persons who served in the Armed Forces for short periods of five to six years were also to form part of the human capital that would populate all types of police forces and even government agencies where there were common functional skill sets.

The crux of the absorption problem after serving in the military in the Agnipath scheme is about providing a reasonable assurance of employment after release from service. Though verbal political assurances have been expressed on the issue, there is a need to evolve a systematic process for the flow of persons from the military to other government agencies. Considering the prevalent scale of unemployment at the national level, the scope in the private sector is severely limited. By 2027, the first batch of Agniveers who are not going to be absorbed are likely to be released from service.

While the first review of the scheme would hopefully be completed by 2024-2025, and perhaps some changes, especially the increase in the service period to five-six years instead of four years, are made, inter alia, toward preserving the fighting efficiency of the military, the demand for post-release employment will also have to addressed. In particular, the new government will have to act in this regard expeditiously.

What is important for the political leadership is to accept that even if the Agnipath scheme is scrapped, another scheme has to be put in place that protects military effectiveness and reduces the budget outgo on pensions. In any case, for the next decade and a half, until the pension outgo starts shrinking due to the Agnipath scheme, India’s defence budget will have to be boosted to cater to the growing demands of modernisation and the pension bill. There has been no sign for several decades of such boosting being done. Surely, the darkening clouds of global and regional geopolitical confrontation provide  justification. The newly elected government must display its recognition of the need by expanding the defence budget and making necessary changes to the Agnipath scheme.

Lt Gen (Dr) Prakash Menon (retd) is Director, Strategic Studies Programme, Takshashila Institution; former military adviser, National Security Council Secretariat. He tweets @prakashmenon51. Views are personal.

(Edited by