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All eyes are on GST as Centre plans higher social pension
September, 06th 2017

The government has readied a draft proposal to increase the quantum of the three key "social pensions" but all eyes are on the state of revenues post-GST, with the revamp now hinging on whether the Centre will have resources to fund the revision.

According to estimates, restructuring the 'National Social Assistance Programme (NSAP)' — old-age pension, widow pension and disability pension — will incur an additional expenditure of Rs 10,000-12,000 crore over the present annual budget of Rs 9,500 crore.

While the rural development ministry has worked out the proposal, it is learnt that it will be put to the Expenditure Finance Committee only when the picture becomes clear on the availability of funds.
"GST will be the main factor in deciding the fate of the proposal. If the funds are available, we are ready," a source said.

According to observers, revenue collections in the first quarter far exceeded the Centre's expectations, raising hope that funds may not be a hurdle in the way of such revisions. The Sumit Bose committee had recommended that the government link pensions under NSAP, given to BPL households, to the consumer price index and reduce the eligibility age for widow pension from 40 years to 18 years.

While accepting these recommendations, the ministry may also seek to absorb the increased outgo on pensions by restructuring the funding pattern.

Against the present arrangement of bearing the total cost alone, the Centre may ask states to foot 40% of the bill. Crucially, the extent of coverage is still to be finalised, possibly in view of the uncertainty over resources.

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While the expert panel said pensions should be extended to all households except those "automatically excluded" under the 'socio-economic caste census' — the measure of deprivation levels — the rural development ministry is learnt to have kept it open whether to limit its schemes to families with "one deprivation" or "two deprivations".

As per the preliminary proposal, the ministry may raise the old-age pension from Rs 200 to Rs 500, of which the Centre will pay Rs 300 and states Rs 200.

While the pension covers 3.5 crore households, extending it to those with "one deprivation" will spread the net to 8.72 crore households and extending it to those with "two deprivations" will spread it to 5.5 crore households. The ministry favours instituting widow pension for those aged 18-39 years while agreeing to pay a one-time grant for remarriage. On disability, the ministry is ready to change the eligibility criteria from 18 years to the person's date of birth, and from 80% disability to 40% disability. The pension too is to be raised from Rs 300 to Rs 500. According to estimates, the Centre will need around Rs 22,000 crore to fund the revamped pensions. Introduction of state's share of 40% will bring in Rs 10,000 crore and considerably ease the Centre's burden.

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