Agnipath scheme to stay, tweaks likely in the upcoming budget or later

The four-year armed forces service scheme, Agnipath, may undergo some changes in the Union Budget or subsequently to make it more attractive.

Despite opposition protests, the Union government assesses the scheme as an effective instrument in attaining the twin goals of improving the youth profile of the armed forces and addressing the issue of mounting defence pension liability, said two persons with knowledge of the thinking in the government.

Under the scheme, introduced in June 2022, men and women aged 17.5 years to 21 years are recruited below the officer rank in the three services, given optimized basic military training and specialised trade training.

The scheme then allows for the absorption of a fourth of these recruits, called Agniveers, in the permanent cadre.

“The scheme has taken off. It helps in giving the defence budget a much-needed makeover, in terms of directing more spending towards technology and weaponry and less towards human resource expenditure,” said the first person mentioned above, who spoke under the condition of anonymity.

The scheme may be modified either in the FY25 Budget or later, but it will continue, the person added.

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The Agnipath scheme aids in effectively utilizing the financial resources available for the forces, the second person mentioned above said, who too didn't want to be named.

The armed forces have about three million retirees overall, many in short service commissions, leading to a shorter service period and a comparatively long pension period for many service professionals.

“The pension liability, if not addressed, could become unsustainable,” said the second person.

For FY25, the government has allocated ₹1.41 trillion for defence pension, nearly a fourth of the ₹6.2 trillion defence budget.

‘Young soldiers in the forces’

"Agniveers do a four-year duty. They get a tax-free lump sum at the end of their four-year tenure. At the end of the four years, another set of people come in. So you have young soldiers in the forces perpetually. About a quarter are permanently retained," the second person said.

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Experts said it is important India takes a long-term perspective of public finance and addresses sticky issues like pensions.

“The Centre in 2004 introduced a contributory pension system called the NPS, thus moving away from the old pension scheme (OPS) with defined benefits as part of pension reforms and to ensure fiscal sustainability,” said N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy, New Delhi.

“Agnipath is one way to adjust for the long term,” said Bhanumurthy. Going back to the old pension system is not the way forward and there should be a middle path between NPS and the old pension system, he said about the ongoing debate about some states backing the old pension system.

"We will have to look at the long-term perspective on public finances and ageing," he said, adding that there needs to be more analysis of intergenerational issues, pension, ageing and insurance.

Spokespersons of the ministries of finance, defence, and the Prime Minister's Office (PMO) didn't respond to emailed queries.