Like General Motors, there’s a pensions bomb ticking at Indian Railways

This piece originally appeared on Livemint.com

 

One is a venerable private American institution, the other, the very definition of job safety in India. Auto maker General Motors employed close to a million at its peak, the Indian Railways, 1.65 million. When they started, in an era of low life expectancy, an employer paying pension for life was a noble HR practice. But their workforces grew, people started living longer, it turned into a cross for employers, cramping growth and possibilities.

Mounting pension liabilities contributed to pushing GM to the verge of bankruptcy during the 2008 credit crisis, before the US government bailed it out. The company has since aggressively—and painstakingly—been addressing its estimated pensions obligations, which exceeded its revenues in 2008. At the beginning of 2014, that obligation stood at $105 billion, an amount that can potentially buy it Ford Motors, Tesla Motors and Fiat Chrysler today.

GM has been offering payouts to former employees and transferring the burden to insurers. It has also shifted from so-called defined benefit plans (where the employer promises pension for life, regardless of employee contributions) to defined contribution plans (what employees receive is a function of what they contribute). And the occurrence of the words pension and pensions in GM’s annual report has come down from 433 in 2008 to 134 in 2014.

Back in 2004, the government of India also made the switch from defined benefits to defined contributions, but only for employees joining service after 2004. The Indian Railways had 1.44 million employees in 2004. It’s been setting aside progressively larger sums to fund their pension, leaving it with little to finance the expansion and modernization of the country’s rail network. And even then, its pension problem is far from over.

A COMPARISON OF PENSION BILLS

 

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THE EMPLOYEE BASE OF THE TWO ORGANIZATIONS

 

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FUTURE EXPENSES FOR THE ORGANIZATIONS

 

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Why India’s rural employment guarantee scheme is on the decline

This piece originally appeared on Livemint.com

 

The government’s flagship rural employment guarantee scheme is on the decline. On almost every key metric, the scheme drafted under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)—which promises 100 days of employment a year to every rural household that demands it and mandates payments of wages within 15 days—is showing sharply lower numbers in 2014-15.

The fall is more perceptible in states ruled by the Congress-led United Progressive Alliance (UPA) than the ones ruled by Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA).

The big picture

Be it the amount of work done or the speed of payment, the numbers are down compared with the last two years.

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The declining demand

Demand for work has consistently dropped under the Narendra Modi government, which some opposition leaders attribute to intentional Total expenses (in Rs crore) delays in payments to states by the centre.

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The declining supply

Compared with earlier years, a smaller percentage worked for more than 60 days a year and a higher percentage for up to 40 days.

 

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The states and political parties

The drop in work, in general, has been sharper for the states led by the UPA constituents. They are also facing longer delays in payments.

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