Karnataka govt under pressure as employees want Old Pension Scheme restored
State govt employees intensify protest seeking the restoration of Old Pension Scheme as promised during 2023 polls, citing a 3-year delay by Uma Mahadevan panel
The decision of the Karnataka government employees to intensify their “do or die” agitation demanding the reintroduction of the Old Pension Scheme (OPS) has emerged as a major challenge for the state government.
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A committee headed by Additional Chief Secretary Uma Mahadevan was constituted to study the reimplementation of OPS in various states and submit a report. However, even after nearly three years since its formation, the committee has not submitted its report.
Angered by the delay, government employees have now set a one-month deadline for the submission of the report. They have warned that they will resort to a work boycott if the report is not released, putting the government in a difficult position.
Unfulfilled poll promise
During the 2023 Assembly elections, the Congress-led government had promised to restore the OPS. However, even after completing two and a half years in office, the government has not reintroduced OPS, pushing employees to the brink of losing patience. Meanwhile, the advantages and disadvantages of restoring OPS have become a subject of intense debate.
Reintroducing OPS would place a significant financial burden on state economies. Compared to the National Pension System (NPS), OPS would impose a 4.5 times higher financial liability. The Reserve Bank of India (RBI) has estimated that by 2060, an additional 0.9 per cent of the country’s Gross Domestic Product (GDP) would need to be allocated solely towards pension expenditure.
Additional financial burden
The Central government has constituted the Eighth Pay Commission to revise the salaries of its employees. In Karnataka, the recommendations of the Seventh Pay Commission have been partially implemented, with several proposals still pending.
With the Centre setting up the Eighth Pay Commission, the state government will inevitably have to constitute a new pay commission as well.
The state government has revised salaries and pensions for its employees, resulting in a 58.5 per cent increase in basic pay and pensions. In 2025-26, approximately Rs 85,860 crore is being spent on salaries of government employees, a 19 per cent increase compared to the previous year. Around Rs 37,655 crore has been allocated for pensions of retired employees, marking a 25 per cent rise year-on-year.
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The total expenditure, including salaries, pensions and interest payments, is estimated at Rs 1,69,115 crore. Of the 5.7 lakh government employees currently in service, the majority are demanding the Old Pension Scheme. This would further increase salary and pension payouts, adding to the government’s financial burden.
Guarantee schemes strain finances
The state government is already struggling to mobilise funds for its five guarantee schemes, which together require an annual expenditure of around Rs 60,000 crore. Funds from several corporations and development programmes are being diverted to finance these guarantees. In such a scenario, restoring OPS would make it even more difficult to meet pension liabilities.
If OPS is reintroduced, pension expenditure in many states is expected to rise sharply by 2030. By 2060, the additional OPS burden is projected to reach 0.9 per cent of annual GDP.
“An OPS review committee was formed during the Congress-JD(S) coalition government in 2018. As promised in the Congress manifesto, we have raised this demand. It is not right to delay the matter indefinitely. We have requested Uma Mahadevan to submit the report within a month,” said Shantaram Teja, president of the NPS Employees’ Association, speaking to The Federal Karnataka.
He added that while OPS committees in Kerala and Tamil Nadu had reviewed the NPS, they had not restored OPS. “That is why we have opposed the appointment of such committees from the beginning. The Old Pension Scheme that was in force before April 2006 must be reinstated. Ensuring financial security for employees’ families after retirement is our sole demand,” he said.
In January 2024, the state government brought around 13,000 employees, whose recruitment notifications were issued before April 2006 but who were appointed after that date, under the OPS. This has increased the number of employees covered by OPS. The OPS review committee has studied the financial implications, including post-retirement benefits and fiscal limits, for all such employees.
States that restored OPS
As states have been given the authority to choose between OPS and NPS; Rajasthan, Punjab, Chhattisgarh and Himachal Pradesh have already reverted from NPS to OPS.
The Central government abolished OPS on January 1, 2004, and introduced the NPS, making it mandatory for all central government employees. In response to demands for reforms in NPS, the Centre announced the Unified Pension Scheme (UPS). From April 1, 2025, employees will have the option to choose between NPS and UPS.
In Karnataka, NPS was implemented from April 2006. Employees recruited after that date fall under NPS, while those recruited earlier are covered by OPS. Currently, about 2,29,497 employees are under OPS, while approximately 2,82,536 employees are covered by NPS.
OPS vs NPS
Under the OPS, retired employees receive a monthly pension equal to 50 per cent of their last drawn salary. Pension amounts increase in line with dearness allowance revisions.
Under the NPS, employees are required to make regular contributions during their service, with a portion of their salary invested in the pension fund. These funds are invested in market-linked instruments.
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For instance, if a government employee contributes 10 per cent of his/her salary to the NPS, the government contributes 14 per cent to the employee’s NPS account. Pension benefits after retirement are determined based on market performance.
Unions defend OPS
The state government contributes around Rs 2,500 crore annually to the NPS fund. Since NPS was implemented in 2006, a cumulative fund of approximately Rs 30,000 crore has been built. Employees can withdraw up to 60 per cent of this amount, while the remaining 40 per cent remains invested in the market.
Due to 2,76,386 vacant posts in the state, around Rs 1,914.68 crore in NPS contributions is being saved annually. Similarly, monthly savings from salaries and allowances are estimated at Rs 15,590 crore. Taking all expenditures into account, the government is saving approximately Rs 1,87,080 crore annually.
Most employees currently under NPS are expected to retire within the next 15 to 20 years. Therefore, employee unions argue that restoring the OPS would not impose an excessive financial burden on the government.
(This story was originally published in The Federal Karnataka)
