Mint ST : 2019-02-11

CORPORATE : 11 : 7

CORPORATE

07 CORPORATE MONDAY, 11 FEBRUARY 2019 NEW DELHI Govt’s new pension scheme seen adding to subscribers’ confusion Suneera Tandon [email protected] A slew of conditions and exclusions have made the new PMSYM scheme a difficult selling proposition NEW DELHI M arico Ltd expects new product launches in its personal care and foods portfolio to generate 7-8% of the company’s revenue by fiscal year 2022, up from the current 3-4%, chief financial officer Vivek Karve said. In the last few years, Marico has increased the number of new product introductions as it seeks to diversify beyond its core products portfolio of Saffola and Parachute oils. “In personal care as well as foods we have had a busy calendar on launches. While today new launches might not have a significant impact in terms of share of the top line, the intent is to go up to 7-8% of the top line by FY22,” Karve said post the company’s earnings earlier this week. The company’s current pace of new launches is significantly higher than it has been in the recent past, Karve added. On Tuesday, Marico announced a 5% growth in its domestic business. For the quarter ended 31 December, consolidated sales at the company stood at ₹1,861 crore, while profit rose 12.4% to ₹251 crore. During the quarter, Marico launched a range of packaged health foods under the Saffola Fittify brand, which includes a range of premium green tea and coffee. Additionally, it rolled out a dry fruit hair oil in Rajasthan and Maharashtra and new perfume Neil Madhav Borate m the unorganized sector with irregular income. PMSYM only allows monthly contributions. Fourth, APY provides for return of corpus on the death of the subscriber and his spouse. In PMSYM, workers only get a pension and do not accumulate a corpus for their family. On the death of the worker and his/ her spouse, the corpus is forfeited to PMSYM. Fifth, it will be directly managed by the government unlike APY, which is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). There is only one parameter on which PMSYM scores over APY. It provides for equal government co-contributions to all subscribers. This brings down the amount needed from the subscriber’s pocket. APY also provides for government co-contributions, but only for those who joined before 31 March 2016, and who were not taxpayers , or beneficiaries of any other social security. As a result, the monthly contribution at age 30 in PMSYM is ₹55 against ₹126 in APY. However, the two cannot strictly be compared because APY provides for return of the accumulated corpus to the subscriber’s family, while the accumulated corpus is forfeited to PMSYM fund. MINT GRAPHITI [email protected] The great Indian pension mess T (in ŕ) NEW DELHI 400 Unorganized workers have to choose between pension products administered by different regulators under different sets of complex rules. 400 200 he government on 7 February notified rules for the Pradhan Mantri Shram Yogi Maan-dhan (PMSYM) scheme, which was announced in interim budget 2019-20 as a pension scheme for the unorganized sector workers. PMSYM promises a pension of ₹3,000 per month when the subscribers turns 60, in return for fixed monthly contributions starting for as little as ₹55. Unorganized sector workers between 18 and 40 years, and earning up to ₹15,000 per month can join the scheme, which will be launched on 15 February. A slew of conditions and exclusions have, however, been specified, making it a difficult selling proposition. There is little to distinguish it from the existing Atal Pension Yojana (APY) and, in many ways, it is a step backward from APY. Subscribers can, in theory, be part of both schemes, but this only adds to the complexity of the system. Unorganized sector workers in India can choose between life insurance policies (including Life Insurance Corporation of India policies), PMVVY (Pradhan Mantri Vaya Vandana Yojana), APY and now PMSYM, in order to secure a pension for themselves. They also have the choice of saving their money in Public Provident Fund, mutual funds and small savings schemes such as National Savings Certificates (NSCS) and Kisan Vikas Patras (KVPS). However, these products provide for retirement corpus growth rather than a FPIS turn net buyers in February; invest ₹5,300 crore in just six sessions Type of pensiontype of Pension Market linked** Fixed Fixed Product/regulated Insurance policies/irdai Atal Pension YOJANA/PFRDA Pmvvy/central Pmsym/central Mutual funds*/sebi Ppf*/central Small savings*/central by 350 government government 300 Fixed Market linked Fixed Fixed bit.ly/2mwyn WR Marico chief financial officer Vivek Karve. 250 government government 200 *Post office deposits, National Savings Certificates, Kisan Vikas Patras, etc. These products provide for accumulating a retirement corpus rather than paying a fixed pension **Or fixed depending on policy type 200 sprays under the Set Wet brand. During the year, new launches at the firm included shampoo, hair conditioner, and serum under the Parachute brand; True Roots hair tonic for greys and an online-specific range of male grooming products under the Set Wet brand. It also added new variants of Saffola oats to its range. In the next 12 months, the company is likely to roll out new products aimed at increasing the “contribution of the new launches to total turnover,” Karve added. Marico has been rolling out newer products at a faster clip as growth from its core hair oils and cooking oil brands remains sluggish. In FY18, its Parachute rigid portfolio (its coconut oil sold in blue bottles) grew by 2%, while its Saffola refined edible oil saw a decline of 1% in volume. Brand Saffola and coconut oil together contributed to 64% of the company’s domestic sales in FY18. 100 200 150 Monthly contribution (in ŕ) 110 55 100 Central government 100 50 55 Member 0 18 29 40 Entry age (in years) Source: Official gazette For the quarter ending 31 Dec, consolidated sales at the firms stood at ₹1,861 cr, while profit rose 12.4% to ₹251 cr AHMED RAZA KHAN/MINT monthly pension. We have excluded the Employees’ Pension Scheme (EPS) under the EPF Act, 1952, from this list because it applies to organized sector workers. amount which varies according to their age. At 18 years, it will be as low as ₹55 per month and will be matched by an equal contribution from the central government. inferior product. First, APY provides pension ranging from ₹1,000-5,000 per month, while the PMSYM pension is capped at just ₹3,000 per month. This amount, which is already quite low, is likely to be further eroded by inflation over time. Second, PMSYM is only open to those with monthly income of up to ₹15,000, whereas APY contains no such income limit. The limit of ₹15,000 is also incongruous given that Employees’ Provident Fund Organisation is considering increasing the ₹15,000 salary limit for calculating pension under EPS. Third, in APY, you can choose to contribute monthly, quarterly or half yearly, which is of great help to those in An inferior cousin of APY Subscribers can, in theory, be part of both PMSYM and APY schemes, but this only adds to the complexity of the system What is PMSYM? Why introduce PMSYM? PMSYM is all set to come under the labour ministry. Each subscriber’s contributions are maintained in a separate account against a unique number (Permanent Retirement Account Number). No such system has been set up for PMSYM, bringing it directly under government control. Official have indicated that this may have been an outcome of a turf war between the labour ministry and PFRDA. It is a pension scheme targeted at unorganized sector workers aged 18-40, who are not covered by EPS or centre’s National Pension System, and who are not income-tax assesses. Such workers will get a monthly pension of ₹3,000 after they reach 60. In return they have to make monthly contributions of a specified The PMSYM structure is almost identical to APY which also gives a guaranteed minimum pension of ₹1,000-5,000 in return for a fixed schedule of contributions. APY is also for people between the ages of 18 and 40, and provides a pension from age 60. However, in other key respects, PMSYM is actually an

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