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Lok Sabha passing the PFRDA bill is good news. But if government means business, there's more to be done.
After a delay of nearly a decade, the Lok Sabha passed the pension bill on Wednesday. That the bill could finally go through is a heartening signal from Parliament. In terms of implementation, through a network of sophisticated legal contracts, P. Chidambaram had already implemented the decision of the Vajpayee-led NDA government to build the New Pension System (NPS) — it applies for all new recruits to government January 2004 onwards. The delay in the PFRDA Bill, therefore, did not hinder the building of the NPS. With the act in hand, it will be possible to merge the two strands of the NPS (civil servants and the unorganised sector) into a single system with portability. Modern investment regulation will become possible. The PFRDA will have explicit regulatory and supervisory authority on the NPS. The ministry of finance must now recruit a high quality team for the PFRDA and work towards the full-blown NPS, as originally envisaged by the Project OASIS report in 2000.
The NPS is now shaping up as a large pension system by world standards. It features some of the lowest costs in the world for fund management and record keeping, thanks to the sound foundations right from the outset — with centralised record keeping at the National Securities Depository Limited and procurement of fund managers through auction. While mutual funds and insurance companies have been beset by scandals in consumer protection, the design of the NPS, from the start, incorporated a sophisticated treatment of such imperatives. Every employee of a private firm must be given the choice of walking out of the clutches of the EPFO, and shifting to the NPS.
The PFRDA Bill had become a symbol of the inability of the UPA 1 and UPA 2 administrations to carry through the simplest of policy projects — even one that had been initiated by the NDA administration. Now, the UPA government must vigorously push on with the legislative agenda. To make up for 10 years of stalling and decay, there is no time to lose. Of prime importance are four big projects: the goods and services tax, the direct tax code, the Unique Identification Authority of India and the Indian financial code. All are at a mature stage, draft bills already in hand. It should be possible to enact some of these laws in these last few months of the UPA's term.