Centre raises borrowing limit for 22 states to meet NPS commitment

According to a finance ministry statement, "States allowed an extra borrowing ceiling equivalent to employer and employee share of contribution of its employees as per the guidelines of the National Pension Scheme over and above the normal net borrowing ceiling of 3% of GSDP for FY2023–24."

The return to the Old Pension Scheme (OPS) by a few states and reports of some other states moving in the same direction would exert a huge burden on state finances and restrict their capacity to undertake growth-enhancing capital expenditures.

Internal estimates suggest that if all the state governments revert to OPS from the NPS, the cumulative fiscal burden could be as high as 4.5 times that of NPS, with the additional burden reaching 0.9% of GDP annually by 2060.

This will add to the pension burden of older OPS retirees whose last batch is expected to retire by the early 2040s and, therefore, draw pension under the OPS till the 2060s.

Thus, any reversion to OPS by the States will be a major step backward, undermining the benefits of past reforms and compromising the interests of future generations.