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Sarbajeet K. Sen

NEW DELHI, March 7

A PENSION reform thirsty Government appears to have rushed to the OASIS (Old Age Social and Income Security) to quench its thirst, leaving the Insurance Regulatory and Development Authority (IRDA) high and dry in the process.

A close look at the framework of the new pension structure being proposed by the Ministry of Finance reveals that the IRDA's report on pension reforms submitted in October 2001 has been all but dumped. In contrast, the sketch of the new structure has drawn heavily from the earlier Project OASIS (Old age social and income security) report of January 2000.

At least four major decisions relating to pension reforms that have come to light in the immediate post-Budget days, including the setting up of a new Pension Regulatory and Development Authority (PRDA), the number of fund managers, the variety of schemes on offer and their investment pattern, have been taken straight from the OASIS report. Importantly, all these pillars of the new structure run directly in contrast to what IRDA had suggested.

Thus, while IRDA had made out a detailed and forceful argument for bringing the regulation of pension under its own fold, the Government has accepted the OASIS report (also known as the S A Dave committee report) of having an independent regulatory authority. "IRDA feels that the regulation of the pension sector could be handled by them," the IRDA report had said, while OASIS had suggested the Indian Pensions Authority as `a new regulatory agency.'

Moreover, on the decision to choose six pension fund managers (PFMs), the Government has settled exactly for the same number of fund managers suggested by the Dave Committee. In contrast, IRDA had categorically suggested that there should be "no cap on the number (of PFMs)" and felt that that "there should be better indices to select the pension providers."

The OASIS report has also been the preferred report relating to the number and type of schemes that the PFMs would be allowed to offer in the new system. The report had suggested that each PFM should have three schemes in all — Safe, Balanced and Growth — which has now been adopted by the Finance Ministry.

A comparison of the investment patterns suggested by the OASIS report reveals that they are on the same lines as has been finally accepted by the Government. Thus, investment by the PFMs would be allowed in equities, rated corporate bonds and Government papers in almost identical pattern as had been laid down by the Dave Committee.

In contrast, the IRDA had suggested that such operational details of the pension structure should ideally be left for the regulator to decide. "The Authority at this stage will not like to lay down micro-principles that would constrict freedom of action... The primary responsibility to lay down norms and monitor their adoption by the fund managers should rest on the pension regulator," IRDA report had said.

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