The introduction of the Pension Fund Regulatory and Development Authority (PFRDA) Bill — amid high drama in Parliament on Thursday — was a do-or-die move by the government. Any further delay or, more important, a defeat on this issue even at the introduction stage, would have been a huge negative for UPA-2, which has been on a face-saving spree on several other counts recently. If the BJP had not come to the ruling party’s rescue, it would have been a setback for the Congress leadership’s commitment to its reform agenda.
The Prime Minister has repeatedly said that economic reforms are on track, and the PFRDA is very much part of this in the pension sector. It is a demand that has been made by industrial bodies. Foreign investors too have been looking forward to investments by pension funds. Indian insurance companies, businessmen and foreign investors are already disgruntled over the delay in raising the cap on foreign investment in insurance companies, and the government has not been able to go forward on this due to stiff resistance — not only from the Left but also from its own members and allies. Therefore, the government has cleverly kept out the FDI cap issue so that it is free to increase the cap if and when possible without having to seek Parliament’s approval.
The Manmohan Singh government has been stuck with the PFRDA Bill, which was introduced first by the National Democratic Alliance government. It was unable to take it forward during UPA-1 as its Left partners opposed it. On Thursday, it was the absence of Congress MPs in the House at the time of introduction that nearly saw the measure defeated on the floor. The government is thinking of convening a special session of Parliament at the end of May (though this is not certain) to get the bill passed. Since it has the needed majority, there should ordinarily be no problem unless its allies revolt and the BJP does not come to the rescue once again.
There has been a solid divide on the PFRDA issue. The PFRDA will be a structured regulatory body with more teeth to oversee innumerable pension funds across the country. It will monitor the New Pension Scheme (NPS), which has also not found acceptance from the Left and several trade unions. The NPS, they argue, is not a pension scheme at all but an investment scheme, and its returns will depend on the NAVs (net asset value) of six mutual funds, including that of the State Bank of India and UTI, which handle NPS. The Left and the working class in general have been against pension and provident funds being used for investment in the stock market. They feel that once funds go in that direction, they will be at risk from speculators. Several scams have already hit the market. This is also one of the reasons why the trustees of the Employees Provident Fund Organisation (EPFO) are holding out against the government’s repeated efforts to get that money, or even a chunk of it, into the stock market. The labour ministry, which oversees the EPFO, has demanded that the government give a guarantee for the money invested. The government has fought shy of this. This is the reason EPFO investments remain primarily outside the stock market. But with the PFRDA in place, the EPFO may be migrated to the PFRDA regime. The fate of over `3 lakh crores — under the EPFO — and of over 40 million crore workers is at stake.