Armed with statutory powers after the passage of the pension Bill in Parliament, the Pension Fund Regulatory and Development Authority now wants to aggressively expand pension coverage for the unorganised sector workers through the Swavalamban scheme and has sought the government's help to extend the Rs 1,000 per annum subsidy to subscribers under the scheme by another 25 years.
While the extension of Swavalamban scheme could be another poll plank for the UPA ahead of Lok Sabha elections in 2014 along with the food security law, the finance ministry is weighing the fiscal implications of the move considering that growth in the enrolment of unorganised sector workers could rise exponentially.
Only 12% of the workforce is now covered by one or the other social security scheme. "We have sought extension of the subsidy scheme by 25 years. The finance minister has agreed to consider a proposal to this effect after a consideration of the financial involved," PFRDA chairman Yogesh Agarwal told FE.
The government announced the Swavalamban scheme in the Budget for 2010-11 for all citizens in the unorganized sector. Under the scheme, the government contributes Rs 1,000 to each NPS account where the annual contribution is Rs 1,000-12,000. The scheme is offered to subscriber who are not covered under any other social security schemes like provident fund or pension.
Although the government extended the subsidy for Swavalamban until 2016-17, the scheme has so far covered only about 2 million of the total 400 million plus workers in the unorganised sector.
"The potential for the growth in pension is very vast. The NPS corpus is doubling every year but we still have 88% of the population which is uncovered," Agarwal said, referring to the National Pension System (NPS) whose corpus has grown exponentially from just Rs 2,277 crore in 2008-09 to over Rs 33,000 crore at the end of May 2013.
The government has budgeted subsidy payment of Rs 150 crore on account of Swavalamban for 2013-14. It has so far spent Rs 168 crore for subsidy and promotional activities since 2011-12.
While confirming the proposal from PFRDA, sources in the finance ministry said the regulator has been asked give an assessment of the extra funding support that the Centre will have to provide if the Swavalamban scheme has to be extended.
"The ministry wants PFRDA to take into consideration the possibility of an exponential growth in membership -- not just the business-as-usual scenario