Sept. 5 (The Teegraph): The Centre shells out Rs 60,548 crore by way of pay and allowances to serving personnel in the army and Rs 48,851 crore as pension to retired personnel - a ratio of 55:45. Very soon, that is expected to reach parity before tilting in favour of pensions.

In contrast, the pay-pension ratios in the navy and the air force are more reasonable: 67:33 in the navy and 75:25 in the air force.

The defence services do not have a contributory pension system - which was implemented for all other civil services cadres from January 1, 2004. This means the defence pension burden will have to be borne entirely by the Centre.

The five-year pension reset clause announced by the Centre today means that the burden will continue to become heavier.

Governments are known to slap taxpayers with a cess to cope with similar pressures - not unlike the Kargil cess that the Atal Bihar Vajpayee government imposed on taxpayers in 2002 to help pay for the costs of the war with Pakistan.

The five per cent Kargil surcharge raised Rs 7,000 crore - and there was a lot of criticism of the way the funds were used to pay for expenses unrelated to the war.

In his budget speech in 2002, then finance minister Yashwant Sinha announced the Kargil cess thus: "I have already stated national security is an overriding concern. Its cost has to be shared by all of us. I, therefore, propose to impose a modest surcharge of five per cent across the board on all categories of taxpayers, except individuals and Hindu undivided families having total income up to Rs 60,000."

There was some respite in the following year.

In budget 2003, Sinha announced: "...the 5 per cent surcharge, levied last year in connection with the security of India, will be halved in the case of corporate assessees, firms, foreign companies, cooperatives and local authorities. In the case of individuals, Hindu undivided families, and association of persons etc, this surcharge will be removed entirely, except in the case of those earning an income above Rs 8.5 lakh. From them, that is those earning more than Rs 8.5 lakh, I will collect a 10 per cent surcharge on the tax, which works out to less than 3 paise out of an income of a rupee."

The Modi government has already estimated that the immediate cost of implementing Orop will be anywhere between Rs 8,000 and 10,000 crore at present and, added ominously in its media note, it "will increase in the future".

So, don't be surprised if the finance minister re-imposes a cess in his budget next year to cover the cost of the additional payout because of Orop.

Photo credit: The Telegraph)