Agnipath scheme, rolled out recently by the government, has unleashed a huge backlash across India. The backlash by youngsters is emanating because of the uncertainty over job prospects after completing the required 4 years of training under the scheme, and what has compounded the problem is that, as per the scheme, only 25 per cent soldiers will be recruited in defense services. The objective of bringing the scheme was first to lower the age profile of our armed forces and secondly, to bring down the pension payout by the government. What the government would save through the pension payout route would be invested in capital expenditure to modernise our armed forces, which according to experts, is the “need of the hour.”
Arithmetic behind the Scheme
In the Union Budget 2022-2023, the government allocated Rs 5.75 lakh as defence budget which was an increase of 25 per cent from Rs 4.78 lakh crore of defence budget in FY22, out of 5.75 lakh crore allotted to the ministry of defence, Rs 2.33 lakh crore is revenue expenditure and Rs 1.52 lakh crore as capital expenditure. Capital expenditure is an expenditure incurred on buying new fighter jets, warships, submarines, etc. Simply put: the money spent on creating assets is called as capital expenditure. Also, out of the total defence budget of Rs 5.75 lakh crore, the pension constitutes 25 per cent of the total budget, the budget estimate for pension payout stood at Rs 1.19 lakh crore in FY23.
“If you see the defence budget, almost about 75 per cent is revenue budget and 25 per cent is left for capital expenditure from where you basically get the money for modernisation. So, the scheme is to reduce the pension liability in defence budget, so that more money is available for modernisation or defence budget, which is very important,” explained ex major-general Ak Sivachal.
As many experts have argued, one of the most important objectives of the scheme was to cut down the pension payout and increase the capital expenditure which will help in modernising the defence services. According to estimates, the pension payout is expected to increase with every passing year. In 2020, there were 32 lakh pensioners and every year 50,000 pensioners are being added into this tally. This is being reflected every year in the increasing pension payouts. The actual estimate of pension payout in FY21 stood at Rs 1.28 lakh crore, revised estimate of pension payout in FY22 stood at Rs 1.16 lakh crore and budget estimate of FY23 for pensions is Rs 1.19 lakh crore.
According to media reports, in 2020, army through a proposal had submitted a rough calculation of how much money can be saved by trimming manpower. At that time, the calculation was done for the recruitment of youth for only three years as opposed to the recruitment of youngsters happening for 4-years now under the Agnipath scheme.
According to the proposal, the cost incurred by government for a sepoy for 3-year term engagement was far lesser than the cost incurred on a sepoy for a 17-year engagement. The assessment showed that there would be a prospective lifetime saving of Rs 11.5 crore on one sepoy recruited for a period of 3 -year in comparison to a sepoy who is recruited for a period of 17-yrs.
According to an expert, under the Agnipath scheme, as only 25 per cent soldiers will be recruited after completion of 4 years of term, so going forward this will lead to the reduction in the number of pensioners after some years. If the cycle will continue for 5-10 years, then soldiers eligible for pension in armed forces will reduce substantially leading to a substantial dip in pension payout.
What would be the actual impact of the scheme would be clear after some time, but one thing is pretty clear that the government wants to increase the capital expenditure and wants to modernise the armed forces which can be done only by cutting allocations somewhere else and, in this case, pension seems to be the obvious one.
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