Why IFCI's Retired Employees Are Complaining about Their Pension Benefits?

IFCI Ltd, a state-run infrastructure lender, is facing heat from nearly 600 retired employees who are not happy with the way the company tweaked rules to curtail their pension benefits. These former employees have now filed a written complaint to the finance ministry alleging that IFCI, through its arbitrary action, has created two classes of pensioners among its employees, resulting in unfair discrimination.

What did IFCI do?

Before February 2008, IFCI had been revising half-yearly dearness relief for all its pensioners in line with the model followed by the Reserve Bank of India (RBI). But, from February 2008, the lender “unilaterally” adopted the less-attractive model followed by the Indian Banks’ Association (IBA) for a section of its employees who had retired in the pay scales effective up to 31 October 2002. Consequently, employees and pensioners who retired after November 2002 now receive more attractive entitlements compared with those who got retired before November 2002.

What does that imply?

The pension component typically includes the basic pay at the time of retirement and the dearness allowance, which is revised on a half-yearly basis. So, in case of IFCI, the employees who have retired in the five years through 31 October 2002 and are entitled to monthly basic pension of up to Rs 3,550, the dearness allowance will be Rs 19,122 per month as per the IBA pattern. This was much lower than the Rs 29,520 under the RBI formula, according to employees.

What are the retired employees saying?

SK Handa, one of the pensioners affected by the IFCI’s 2008 decision, told Financial Express: “The arbitrary action of IFCI created two classes of pensioners and resulted not only in discrimination among pensioners but also inflicted huge financial loss to those who have retired in the pay scales effective up to 31 October 2002. We are not asking for any additional or new benefits and are only requesting restoration of benefits as per the RBI pattern (single rate), which we were availing before they had switched over to the IBA pattern.”

Handa is one the pensioners who have written to the finance ministry about the matter in both individual capacity and through a registered forum.