ONGC PRBS - PROPOSED PENSION IN ACTUARIAL REPORT OF 2.8.1996

ASSUMPTION, CONCLUSION, RECOMMENDATION & PROPOSED PENSION IN ACTUARY'S REPORT OF 2.8.1996
by Narayan Singh Rathore


by Narayan Singh Rathore on Friday, October 14, 2011 at 4:34pm

Friends, I present herewith important milestones of much relied upon Actuarial Report dt. 2.8.1996 of K.A. Pandit,which was used for declaring PRBS as "Un-viable" in matter of WP 1718/1996 in Bombay H.C.

Actuarial Valuation Report dated 02.08.199 from M/s. K.A. Pandit (a Govt. approved Actuary) with following Assumption, Conclusion, Recommendation & Proposition: -

3.1. Assumption:

““8. Growth in salary these days is mainly on account of hike in costs of living index.”

3.2. Conclusion:

“12. CONCLUSION:

The scheme is not viable as the salary rise unexpected the salaries have gone up by 78%i.e. 10000 in 1996 from 5600 in 1994 i.e. an 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.”

3.3. Recommendation:

“13. RECOMMENDATION:

To make the scheme viable the fund is to be raised from the 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 long term recruitment policy. In order to take care of the fund additional contribution should be raised from the year in whichexorbitant salary rise has been given i.e. 1992 and difference with 12% interest to be paid to the fund.”

3.4. Proposed Pension:

“Govt. scheme offers pension of (1/70) for each year of service if in the ONGC scheme we also introduce same accrual rate from 1.11.1995 then pension will be in two parts for the service rendered upto 31.10 1995 pension is (44/33) and from 1.11.1995 it will be (50/33).”

4. By placing reliance on starting line of Conclusion “The scheme is not viable” at Para 3.2. above, Hon’ble Bombay H.C. issued Ad-interim Order dated 05.11.1996, observing that:

“The report shows that the scheme is not viable on account of unexpected rise in the salary and change in the formula of D.A. M/s K. A. Pandit have recommended that to make the scheme viable it is necessary to raise funds from the sources available. The fund position should be reviewed especially when there is a change on account of wage negotiation or long term recruitment policy. It is recommended that 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. It is also recommended that any difference of annuity cost because of above salary rise and interest payable to LIC for 1992 to date of payment of annuity should be raised in such a way that it does not pose undue problems to the existing members.

On a careful scrutiny of the report, it is clear, that the Scheme is not viable unlessadditional funds are raised from different sources. Otherwise the Scheme is liable to be scrapped altogether. The question relating to generation of Additional funds will have to be considered by negotiations between the Officers Association and the Corporation.” .

4.1. Ordinary prudence required negotiation only to ‘raise / generate Additional funds’ to save the Scheme, if warranted after examination of Data / Statistics pertaining to assets/liabilities of Fund arising from 1.4.1990. Factually, there was no need at all to go for any kind of Negotiations, Hon’ble High Court gave lead point by citing Actuarial Report in Ad-interim Order dated 5.11.1996 itself. Trustees had provision in the Scheme to Review fund position and raise the Additional Contribution in accordance with Consumer Price Index, as done several times under O.Os/Cir. Nos. PRBS-9 dated 24.3.1992, 1(23)/91-GA dated 26.8.1992, ONGC/HQ/ PRBS/31/92 dated 9.12.1992, ONGC/HQ/ PRBS/31/92 dated 23.1.1993 and 1(23)/91-GA dated 26.6.1998.