Last month, the Pension Fund Regulatory and Development Authority (PFRDA) issued revised guidelines for the registration of the Pension Fund Managers (PFMs). These guidelines are for the PFMs to manage the National Pension System (NPS) in the non-governmental and private sector. See here. The NPS was implemented in 2004 for all government employees and later extended to the private sector in 2009. The guidelines bring about the following changes in the NPS:
Although NPS was made accessible on a voluntary basis to non-government employees and those working in the private sector since 2009, the subscription to the schemes under NPS was lower than expected. In August 2010, a committee was set up under the chairmanship of Mr. G.N. Bajpai to review the implementation of NPS in the informal sector. The Committee noted that since NPS was opened to the general public there were only 50,000 private sector subscribers until May 2011. According to the Committee, the low subscription was due to the low-to-negligible distribution incentive to the PFMs to distribute the different schemes to the subscribers to invest their funds. The Committee thus recommended that PFRDA should consider revising the structure of the NPS so as to increase subscription. It suggested making the fee structure dynamic for PFMs. The Committee had also suggested that there should be some revision in the bidding as well as the selection process for the PFMs to increase competition and thereby incentivise them to distribute the schemes. These changes, as suggested by the Bajpai Committee and now notified by the PFRDA, are different from the original design of the NPS. The Old Age Social and Income Security (OASIS) Report of 2000, which had initially suggested the establishment of pension system for the unorganised sector in the country, had recommended a low-cost structure for the pension system. The Report had stated that the choice of PFMs should be based on a bidding process where the lowest bidder should be made a PFM under the NPS. The rationale for the auction base for the PFMs was that it would provide a system to the subscribers whereby they could make investments for their old age by paying a minimal fee. A set uniform fee was meant to eliminate the large marketing expenses which would ultimately get passed on to the subscibers. In addition, the intent behind keeping the fund managers from the distribution and marketing of the schemes was to prevent any mis-selling (misleading an investor about the characteristics of a product) that may happen. Recent newspaper reports have raised doubt if these new rules would help in increasing the penetration of the NPS in the markets. However, the chairman of PFRDA, Mr. Yogesh Agarwal, in a recent interview explained that it was important to bring about changes in the structure of the NPS. According to him a scheme which was mandatory for the government sector could not be expected to perform as well in the private sector (where it is voluntary) without any changes made to its structure. He also stated that the NPS should be able to compete with other financial products such as insurance and mutual funds in the market. See here for the PRS Legislative Brief on the PFRDA Bill, 2011. Notes: The seven PFMs are LIC Pension Fund Ltd., UTI Retirement Solutions Ltd., SBI Pension Funds Pvt. Ltd., IDFC Pension Fund Management Co. Ltd., ICICI Prudential Pension Funds Management Co. Ltd., Kotak Mahindra Pension funds Ltd., and Reliance Capital Pension Fund Ltd..
As the dust settles around the 16th Lok Sabha, attention must now shift to the state assemblies, some of which have been newly constituted like Rajasthan, Chhattisgarh, Madhya Pradesh, Odisha, Andhra Pradesh and the few that will go into elections in the next few months like Maharashtra and Haryana. There are 30 state legislative assemblies not including the newly formed state of Seemandhara. In our federal structure, laws framed by the state assemblies are no less important and deserve the same diligence and debate as laws made by Parliament. A brief look in to the performance of some of our state assemblies reveals that these institutions which form the cornerstones of our democracy need some serious attention. State Assemblies: business hours The current Haryana Legislative Assembly that comes to the end of its five year term in October this year has held 10 sessions since 2009 till March 2014, meeting for a total of 54 days – an average of 11 days per year. In comparison, the Lok Sabha sat for an average of 69 days each year from 2009 to 2014. Among state assemblies, only Nagaland and Arunachal Pradesh sat for fewer days than Haryana. In the same period the Kerala Assembly sat for an average of 50 days per year, while Tamil Nadu Assembly sat for 44 days. In its previous term, the Gujarat Legislative Assembly sat for a total of 157 days – an average of 31 days each year. Similarly, the current Goa Legislative Assembly sat for 24 days in 2012 and for 39 days in 2013. Over the last 10 years, the Assembly sat for an average of 26 days a year. It recorded the highest number of sitting days in the last 10 years, at 39 days. Law making in the states In most states, Bills are passed with little or no discussion. Most Bills are introduced and passed on the last day of each session, which gives Members hardly any opportunity to examine or discuss legislation in detail. Unlike Parliament, where most Bills are referred to a department related standing committee which studies the Bill in greater detail, in most states such committees are non-existent. The exceptions are Kerala which has constituted subject committees for this purpose and states like Goa and Himachal Pradesh where Select Committees are constituted for important Bills. The current Haryana Assembly has passed 129 Bills, all of which were passed on the same day as they were introduced. Upto 23 Bills were passed on a single day, which left hardly any time for substantial discussion. In the twelfth Gujarat Assembly, over 90% of all Bills were passed on the same day as they were introduced. In the Budget Session of 2011, 31 Bills were passed of which 21 were introduced and passed within three sitting days. Of the 40 Bills passed by the Goa Assembly till May 2013, three Bills were referred to Select Committees. Excluding Appropriation Bills, the Assembly passed 32 Bills, which were taken up together for discussion and passing in five days. Almost all Bills were passed within three days of introduction. On average, each Bill was discussed for four minutes. In 2012, the West Bengal Legislative Assembly passed a total of 39 Bills, including Appropriation Bills. Most Bills were passed on the same day they were introduced in the Assembly. In 2011, a total of 23 Bills were passed. On average, five Members participated in the discussions on each Bill. In 2012, the Delhi Legislative Assembly passed 11 Bills. Only one of the 11 Bills was discussed for more than 10 minutes. The performance of the Chhattisgarh and Bihar Vidhan Sabhas follow the same pattern. Over the last few years, some assemblies such as Andhra Pradesh, Rajasthan and Haryana have taken some positive steps which include setting up subject committees and permitting live telecast of Assembly proceedings. Every legislator- in Parliament and the states - is accountable to his voter. Weak democratic institutions deprive legislators of their right to oversee the government as enshrined in the Constitution. Inadequate number of sitting days, lack of discussion on Bills, and passing of the Budget and demands for grants without discussion are symptoms of institutional ennui and do not do justice to the enormous import of these legislative bodies. Serious thought and public debate is needed to reinvigorate these ‘temples of democracy’ and provide elected representatives with the opportunity to exercise their right to legislative scrutiny, hold government to account, and represent their constituents.
