Central government salaries and pensions are paid from the Consolidated
Fund of India. This is the main government fund where all revenues, such as
taxes and loans, are deposited. Expenditures from this fund, including
salaries and pensions, require authorization from Parliament.
Consolidated Fund of India: This is the primary fund for all government
revenues and expenditures. It receives money from various sources,
including income tax, customs, and loans.
Parliamentary Authorization: Before any money can be withdrawn from the
Consolidated Fund for salaries, pensions, or any other expenditure, it must
be authorized by the Parliament.
Pensions: Pensions, particularly those for judges of the Supreme Court and
High Courts, are charged on the Consolidated Fund of India. This means
their payment is a mandatory charge against this fund.
The pension sanctioning authority for central government employees is the
Head of the Office where the employee last served. This authority is
responsible for processing the pension papers and issuing the Pension
Payment Order (PPO) to the Central Pension Accounting Office (CPAO).
Initial responsibility: The Head of Office in the Ministry, Department, or
Office where the employee last worked is the primary pension sanctioning
authority.
Processing: The process begins well before retirement, with the Head of
Office sending pension papers to the Accounts Officer at least six months
prior to the retirement date.
PPO issuance: The Accounts Officer processes the papers and issues the
Pension Payment Order (PPO).
CPAO role: The PPO is then sent to the Central Pension Accounting Office
(CPAO) to authorize the payment of the pension through a disbursing bank.
Provisional pension: In cases where the final pension cannot be assessed
before retirement, the Head of Office is authorized to sanction provisional
pension for a period of six months.
The salaries and pensions paid by governments are categorized as
"Revenue expenditure." Revenue expenditure refers to the expenses incurred
by the government in its day-to-day operations and maintenance, such as
salaries, pensions, administrative costs, and subsidies.
The Consolidated Fund of India is the government's main account,
established under Article 266 of the Constitution, where all its revenues
(like taxes and loans) and expenditures are deposited and withdrawn from,
respectively. Money can only be withdrawn from this fund with parliamentary
approval, which is typically granted through an Appropriation Bill. It is
used for all routine government expenses, such as salaries, infrastructure
projects, and debt repayment.
The Consolidated Fund of India is ultimately controlled by the
Parliament of India, which authorizes all withdrawals from the fund. While
the government manages the fund's day-to-day operations, no money can be
withdrawn without parliamentary approval through measures like
Appropriation Bills, ensuring accountability and fiscal discipline.
Parliamentary control: Parliament must explicitly authorize any spending
from the Consolidated Fund. This prevents any funds from being spent
without proper authorization and provides a system of checks and balances.
Government management: The government manages the daily operations of the
fund, which collects all government revenues, such as income tax and
customs duties, and from which all government expenses are paid.
Legislative approval: Parliament's approval is obtained through
Appropriation Bills, which specify the amounts and nature of expenditures
allowed for withdrawal.
Constitutional basis: The fund is established under Article 266(1) of the
Indian Constitution, which also specifies that the fund's custody,
payments, and withdrawals are regulated by laws made by Parliament.
The Contingency Fund of India is a fund established under Article
267 of the Indian Constitution for meeting unforeseen expenditures, such as
natural calamities, when Parliament is not in session. It is held by the
Secretary to the Government of India in the Ministry of Finance on behalf
of the President, and the fund's current limit was increased to ₹30,000
crore by Parliament in 2022. Withdrawals require parliamentary
authorization afterward, and any money spent is later replenished from the
Consolidated Fund of India.
Key features of the Contingency Fund of India
Purpose: To meet urgent and unforeseen expenditures, such as during natural
disasters or other emergencies, when Parliament is not in session.
Legal Basis: Established by the Contingency Fund of India Act, 1950, and
provided for in Article 267 of the Constitution.
Current Corpus: The fund has a limit of ₹30,000 crore, which was increased
by Parliament in 2022.
Custody: It is held by the Secretary to the Government of India in the
Ministry of Finance, on behalf of the President.
Withdrawal Process:
An advance can be made out of the fund for unforeseen expenditure.
This expenditure must be authorized later by Parliament through
appropriations.
"Funded" and "unfunded" describe how financial obligations are
handled. A funded arrangement has money set aside in a separate fund for
future payment, like a long-term loan or a retirement plan. An unfunded
arrangement does not have a dedicated fund and relies on cash flow for
immediate needs or later payment, such as short-term loans or liabilities
due within a year.
Funded
Definition: An obligation where funds are specifically set aside to meet
future payments.
Examples:
Long-term debt: Financial obligations with a maturity of more than one year.
Funded employee benefit plans: A retirement or gratuity plan where a
company sets aside money in a trust to meet future payments.
Funded loan facilities: Bank loans like overdrafts or term loans for
expansion.
Characteristics: Generally considered more secure for investors and
companies because the funds are already allocated.
Unfunded
Definition: An obligation that does not have a dedicated fund and is paid
from general cash flow.
Examples:
Short-term debt: Financial obligations due within a year.
Unfunded employee benefit plans: A plan where the company contributes money
only when a payout is due, without setting aside a dedicated fund.
Unfunded loan facilities: Non-funded credit facilities like letters of
credit or bank guarantees.
Characteristics: Represents a more immediate cash flow need for the company
or government.
What is the difference between funded and unfunded pensions?
Typically, as mentioned earlier, the funding monies will be placed in a
trust fund independent from the employer's other assets. This trust fund
is, therefore, externally funded. In the case of unfunded schemes, any
benefits are paid out of the assets of the employer at the time that the
member retires.
unfunded used to describe a financial arrangement that has been
agreed but for which there is not enough money available: The unfunded
liability for Social Security's old age and disability funds will be $3
trillion by 2070.
Salary is funded; there is no commitment for such treatment
wrt the pension hence unfunded as parliament has the power not to vote.
K Rajaram IRS 71125
On Fri, 7 Nov 2025 at 11:41, Suryanarayana Ambadipudi <
[email protected]> wrote:
> Thank you 🙏
>
>
> *A.SURYANARAYANA*
> *The less you speak,the more you are listened to*
>
>
> On Thu, 6 Nov 2025 at 9:54 PM, Colinjivadi Mahadevan <
> [email protected]> wrote:
>
>> If the pension paid to retirees/pensioners is unfunded cost, what about
>> the salaries paid to serving employees both covered under OPS/NPS.The Old
>> Pension Scheme is applicable only to employees recruited upto 31/12/2003.
>> The beneficiaries under the OPS form a diminishing group which has no new
>> entrant from 1/1/2004. At some point of time when the last pensioner exits
>> from this world the Scheme will extinguish itself.But the wage revisions
>> for serving employees in the Government is perpetual with ten year
>> intervals between revisions.So such wages constitute unfunded cost on a
>> perpetual basis. So ,if pension under OPS is to be considered as unfunded
>> cost , so should the salaries of serving employees be considered as
>> unfunded cost.
>> C H Mahadevan
>>
>> On Thu, 6 Nov 2025, 19:50 Suryanarayana Ambadipudi, <
>> [email protected]> wrote:
>>
>>> To
>>>
>>> The Hon’ble President of India
>>> Rashtrapati Bhavan
>>> New Delhi – 110004.
>>>
>>> Subject: Representation regarding deletion of the words “unfunded
>>> pension scheme” and explicit inclusion of “existing pensioners” under the
>>> Terms of Reference of the 8th Central Pay Commission
>>>
>>> Respected Rashtrapati Ji,
>>>
>>> With due respect and utmost humility, I submit this representation
>>> seeking your kind attention to a matter of significant constitutional,
>>> administrative, and ethical concern regarding the wording of the Terms of
>>> Reference (ToR) of the 8th Central Pay Commission (CPC) notified vide
>>> Gazette Notification dated 3rd November 2025.
>>>
>>> 1. The Clause in Question
>>>
>>> Para (e)(ii) of the ToR reads as follows:
>>> “While making recommendations, the Commission shall take into account,
>>> inter alia, the likely impact on the finances of the Government of India,
>>> the State Governments, and the unfunded cost of non-contributory pension
>>> schemes of the Central Government, autonomous bodies, and other entities
>>> covered under the Commission.”
>>> This clause, while indirectly referring to the Old Pension Scheme (OPS),
>>> neither explicitly mentions “pensioners” nor acknowledges their rights and
>>> interests under the Commission’s purview.
>>>
>>> 2. The Core Concern
>>>
>>> The specific use of the phrase “unfunded cost of non-contributory
>>> pension schemes” is deeply objectionable and discriminatory in tone and
>>> intent, as:
>>> • It equates constitutionally and judicially protected pension
>>> entitlements with fiscal liabilities.
>>> • It reduces pensioners—who served the nation under the sovereign
>>> guarantee of post-retirement security—to mere “financial burdens”.
>>> • It departs from the humane and welfare-oriented language used in all
>>> previous Pay Commissions (from the 4th to the 7th CPC), where “pensioners”
>>> were expressly mentioned as beneficiaries of review and revision.
>>> Moreover, no such terminology (“unfunded scheme”) has ever been used in
>>> reference to pensions of Members of Parliament, Members of Legislative
>>> Assemblies, Judges of the Supreme Court or High Courts, or other
>>> constitutional functionaries—though their pensions are equally
>>> non-contributory and drawn from Consolidated Funds.
>>> This selective and stigmatizing phrasing therefore violates the
>>> principle of equality before law under Article 14 of the Constitution.
>>>
>>> 3. Legal and Constitutional Position
>>> The Supreme Court of India has repeatedly affirmed that:
>>> 1. In Deokinandan Prasad v. State of Bihar (1971) – Pension is a
>>> property right and cannot be withdrawn except by authority of law.
>>> 2. In D.S. Nakara v. Union of India (1983) – Pension is a deferred wage,
>>> a continuation of service benefits, and not a bounty. Pensioners form a
>>> homogeneous class and must be treated equally in matters of revision and
>>> improvement.
>>>
>>> Therefore, to classify the Old Pension Scheme as an unfunded cost
>>> contradicts the judicially settled understanding that pension is an earned
>>> right arising from past service to the State.
>>>
>>> 4. Administrative and Moral Considerations
>>>
>>> The Government of India, as a model employer, has a moral and legal
>>> obligation to uphold the dignity and welfare of its retired employees. The
>>> deliberate omission of the word “pensioners” from the ToR and its
>>> substitution with a fiscal descriptor is inconsistent with this obligation.
>>>
>>> This shift in tone:
>>> • Dehumanises pensioners by turning a lifelong entitlement into a
>>> budgetary liability;
>>> • Creates unnecessary fear and insecurity among elderly pensioners; and
>>> • Erodes public confidence in the government’s commitment to fair and
>>> humane treatment of its retirees.
>>>
>>> 5. Request for Rectification
>>>
>>> In light of the above facts, legal precedents, and moral principles, it
>>> is humbly requested that:
>>> 1. The phrase “unfunded cost of non-contributory pension schemes” in
>>> Para (e)(ii) of the 8th CPC ToR be deleted; and
>>> 2. The words “and existing pensioners under the Central Government,
>>> autonomous bodies and other entities covered under the Commission” be
>>> inserted explicitly, to bring clarity and restore parity with earlier
>>> Commissions.
>>>
>>> A suggested revised version of the clause is as follows:
>>>
>>> “(ii) the likely impact on the finances of the Government of India, the
>>> State Governments, and the pensionary liabilities relating to existing
>>> pensioners and family pensioners under the Central Government, autonomous
>>> bodies, and other entities covered under the Commission.”
>>>
>>> This would reaffirm the rightful inclusion of all existing pensioners
>>> within the ambit of the 8th CPC, in keeping with constitutional equity,
>>> judicial mandates, and past administrative practice.
>>>
>>> 6. Appeal for Presidential Intervention
>>>
>>> As the Constitutional Head of the Republic and Guardian of the rights of
>>> all citizens, including retired public servants, I earnestly appeal to Your
>>> Excellency to kindly direct the Ministry of Finance to review and amend the
>>> ToR of the 8th CPC accordingly.
>>>
>>> Such an intervention would uphold:
>>> • The constitutional sanctity of equality and fairness,
>>> • The dignity of service rendered by lakhs of government pensioners, and
>>> • The moral authority of the State as a model employer.
>>>
>>> With Highest Respect and Gratitude,
>>>
>>> Yours faithfully,
>>> (Lokanath Mishra)
>>> The Chief Adviser, The All India Pensioners Association of CBIC:
>>> [Contact No. 9437314941]
>>> [Email [email protected]]
>>> Date: 05.11.2025
>>> Place: Puri.
>>> Copy for information and necessary action to:
>>> 1. Hon’ble Prime Minister of India.
>>> 2. Hon’ble Finance Minister of India.
>>> 3. The Secretary, DOPT, Government of India.
>>> 4. The Secretary, Expenditure, Government of India.
>>>
>>>
>>>
>>> *A.SURYANARAYANA*
>>> *The less you speak,the more you are listened to*
>>>
>>
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