ONGC IGNORED ACTUARIAL VALUATION RECOMMENDATIONS: ONGC PRBS-1990

ONGC IGNORED ACTUARIAL VALUATION RECOMMENDATIONS: ONGC PRBS-1990
by Narayan Singh Rathore

1. Actuarial Valuation Report dt. 17.4.1990: (Basis for Original PRBS-1990): -

1.1. “Pension payable to employees------at 58 or 60----@ 1/75th of final salary per every completed year of reckonable service with maximum of 44% of salary last drawn (44% of salary for 33 years of reckonable service).”

1.2. “In case of death or permanent disablement while in service pension payable shall be based on 33 years of reckonable service . (44% Pension).------.”

1.3. “Rate of contribution from employees:

01

Age upto 35 yrs

1% of salary

Note: These rates of contribution as decided at the time of admission to the fund will not change with change of age.

02

Age 36 to 40 yrs

2% of salary

03

Age 41 to 45 yrs

3% of salary

04

Age 46 to 50 yrs

4% of salary

05

Age above 51 yrs

5% of salary

1.4. “If it is selected to start pension scheme in the form of transfer of monetized value of benefits we recommend (since the cost of benefit will escalate in future) the value of benefits accumulating at the same rate as that of salary escalation be transferred to the fund.”

NOTE: -

It is an apology of Actuarial recommendations that ONGC violated all these recommendations, which were duly incorporated in original Scheme of 29.4.1990. Officers had accepted the Scheme with due consideration to such terms & conditions.

2. Actuarial Valuation Report dt. 2.8.1996: (Basis for WP 1718/1996): -

2.1. “12. Conclusion: The Scheme is not viable as the salary rise unexpected the salary have gone up by 78% i.e. 10000 in 1996 from 5600 in 1994 i.e. yearly increase of 34%. There is a change in DA formula. DA which was 1.5% of basic pay in 1992 is now 30% of basic pay.”

2.2. “13. RECOMMENDATION:

To make the scheme viable the fund is to be raised from sources available. The fund position should be reviewed from time to time and especially when there is change on account of wage negotiation or the ling term recruitment policy. In order to take care of the fund additional contribution should be raised from the year in which exorbitant salary rise has been given i.e. 1992 and difference with 12% interest to be paid to the fund. -----.”

NOTES: -

(a) The “Review” Clause in the Scheme & Rules was based on Actuarial Recommendation at Para 1.4. above. ONGC / PRBS Trust failed to comply. Rate of escalation in Additional Contribution was retained at 7% till 31.3.1997.

(b) ONGC Finance was required to transfer the monetized value of surrendered benefits right from May 1990 but Cir. No. PRBS – 14 of Oct. 1992 reflected gloomiest picture as ONGC did not remit additional contribution to the Fund. Since Additional Contribution was main source of funding the Scheme, its withholding by ONGC was bound to expose the Scheme to starvation & ultimate Liquidation.

(c) Actuarial recommendation dated 2.8.1996 had made it explicitly obvious that ONGC should pay Additional Contribution at 78% on 1.1.1992 with 12% interest w.e.f. 1.1.1992. If this Actuarial Recommendation was implemented with honest intentions, the Scheme did not require any external “direct contribution” from ONGC.