Nearly five lakh retired employees of Coal India Limited (CIL) got a rude shock at the beginning of this month when they found that their pensions had not been remitted to their accounts, owing to what turned out to be a temporary shortage of funds.
“I have not received my pension for May till today,” NC Jha, former chairman of CIL and president of the state-run monopoly producer’s retired executives’ welfare association told ET on Wednesday.
Last Friday, about 150 former employees of the world’s largest coal producer had gathered at its headquarters in Kolkata to register their concern about non-receipt of pension.
CIL’s pension and provident fund are managed by the Coal Mines Provident Fund Organisation (CMPFO), a body which takes care of social security of coal mines workers. The fund receives 1.16% of basic and dearness allowances of an employee that is contributed by the CIL management on behalf of employees.
CMPFO commissioner Animesh Bharti told ET that there was a delay in transferring funds because there was a temporary fund shortage, aggravated by two consecutive banking strikes at the end of May, which made it difficult to remit funds into banks.
“Every month inflow into the fund is around Rs 120 crore while outgo from the fund is around Rs 180 crore. Liquid money in the pension fund was around Rs 140 crore which was not enough to pay pensions of Rs 180 crore. This prompted us to request Coal India to deposit Rs 100 crore to the pension fund. Coal India accepted our request and we started disbursing pensions,” he said.
Bharti said that the total pension fund size is around Rs 2,000 crore and all of it is invested in instruments which would require several days to liquidate since it needs approval of board of trustees. This added to the problem, he said.
Moreover, he said, Rs 2,000 crore will not suffice if not replenished by additional inflows, and the fund is slated to go dry by 2023, according to an actuarial study.
“Till 2015-16 inflow into the fund was more than its outgo. From 2016-17 onwards, outgo from the fund has turned to be in excess of income thus shrinking the fund size,” said Jha. “While at present the shortfall is around Rs 60 crore per month or Rs 720 crore annually, this outgo is expected to increase exponentially from now on, as more Coal India employees retire with salaries that are higher than those of employees retiring in the past, and will exhaust in five years. At present contribution by about 2.8 lakh employees has been supporting pensions of some nearly lakh retired employees. This ratio will worsen in the near future.”
JN Ghosh, convenor at the All India Coordination Committee of Coal Pensioners and Retired Employees Association, said: “The pension fund was created in 1998 with the provision of being reviewed for adequacy every three years. It was never reviewed all these years. Only recently, actuarial studies were conducted which indicated that the fund is facing the risk of going dry.”
However, in 2017, following pressure from the workers’ unions the management agreed to contribute 7% of basic and dearness of employees into the pension fund. Employees would match it with another 7%. This is expected to increase the fund size by around Rs 1,000 crore every year. The scheme, may have been approved by the ministry but CIL cannot issue the funds as long as the government has issued a gazette notification on the same.
Bharti said CIL agreed to contribute the Rs 100 crore because it would in any case have to start paying on account of the new scheme, which is likely to be notified soon.
According to Bharti, this additional contribution is not enough to sustain the fund in the long run and either the government or CIL needs to take a long-term view.
“An actuarial study suggested that a 14% contribution by employees matched by another 14% contribution by the management would be the ideal situation for the fund to sustain,” said SQ Zama, general secretary of the coal miners arm at All India Trade Union Congress.
Unions have been demanding a levy of Rs 50 per tonne of coal sold to help replenish the fund.
Jha said, “The levy of cess is one of the most viable options. However, it is up to the management and the government to decide.”
Zama said: “In fact even Re 1cess on every tonne of coal sold will raise the pension fund size by at least Rs 50 crore every year. This would double to Rs 100 crore by 2020 and help reach adequacy.”
He said that the union had been demanding infusion of fresh money into the pension fund for several years but it was only recently that a 7% equal contribution was allowed.