constituted - of Planning Commission

significant portion of the increase can be attributed to the implementation of therecommendations of the Sixth Pay Commission. In the projection made by theThirteenth Finance Commission, pensions have been projected to grow at anannual rate of 9 per cent during the award period. They have stated that theMinistry of Finance had projected this to grow at 9 per cent for the first threeyears and 10 per cent for the two subsequent years. In view of the fact that theeffect of increased outgo on pension has already been factored into the 2009-10(BE) figures, the Commission did not perceive any rationale for providing adifferentiated growth rate for this item of expenditure.The projection made in the Budget documents, however, assumes that pensionrelated expenditure may grow at 5 per cent in the coming years. It has beenestimated that pension payments would reduce to 0.5 per cent of GDP by 2013-14 and would decline to 6.5 per cent of net tax revenue to Centre in the sameyear. The assumption made above is associated with risk of large attrition ratein coming years which would result in higher than estimated expenditure in thecoming years. In terms of the estimates submitted by the concerned AccountingUnits/Departments to the Group, the total expenditure on pensions is expectedto go up from `60,350 crore in FY 2012-13 to `85890 crore in the terminal yearof the Twelfth Five Year Plan, i.e. 2016-17. In respect of civil pensions, theseestimates are based on an increase of 13 per cent per annum in the rates ofdearness relief and a 3 per cent accretion (net) to the stock of pensioners on ayear-on-year (YOY) basis. The figures related to Defence Pensioners assume a10 per cent increase per annum on dearness relief.The Group, however, felt that the assumption made by the Thirteenth FinanceCommission was more realistic and allowed a percentage increase of 9 per centper annum.Police: Expenditure on Police can be divided into Salary related expenditureand Other expenditure. Expenditure on Police increased during the EleventhWorking Group Report on Centre’s Financial ResourcesPage-44