Rule 37 - PSU Absorption

37. Conditions for payment of pension on absorption consequent upon conversion of a Government Department into a Public Sector Undertaking.- (1) On conversion of a department of the Central Government into a public sector undertaking, all Government servants of that Department shall be transferred en-masse to that public sector undertaking, on deemed deputation on terms of foreign service without any deputation allowance till such time as they get absorbed in the said undertaking, and such transferred Government servants shall be absorbed in the public sector undertaking with effect from such date as may be notified by the Government.

(2) The public sector undertaking shall frame its rules and regulations within a time frame not exceeding five years.

After such rules and regulations are framed by the public sector undertaking, all Government servants on deemed deputation shall be asked, within a period not exceeding three months from the date of notification of the rules and regulations by the public sector undertaking, to exercise their option to revert back to the Government or to seek permanent absorption in the public sector undertaking.

Such Government servants shall be asked to exercise this option within a period of three months from the date of the communication asking the Government servants to exercise the option.

option referred to in sub-rule (2) shall be exercised by every transferred Government servant in such specified by the Government.

(4) In case, a Government servant, does not exercise any option within the prescribed time limit, shall be deemed to have opted for permanent absorption in the public sector undertaking.

(5) The permanent absorption of the Government servants as employees of the public sector undertaking shall take effect from the date on which their options are accepted by the Government and on and from the date of such acceptance, such employees shall cease to be Government servants and they shall be deemed to have retired from Government service.

(6) Upon absorption of Government servants in the public sector undertaking, the posts which they were holding in the Government before such absorption shall stand abolished.

(7) The employees who opt to revert to Government service shall be repatriated to the Government within two years from the date of exercise of the option and shall be redeployed through the surplus cell of the Government.

(8) The period between the date of option and the date of reversion to the Government shall continue to be on deemed deputation on terms of foreign service without any deputation allowance.

(9) Where an employee retires or dies during the period of such deemed deputation, the pay which he would have drawn under the Central Government had he not been on deemed deputation shall be treated as emoluments for calculating the pensionary benefits to be paid by the Government.

(10) The pensionary benefits in respect of such employee shall be drawn and paid in the manner to be specified by the administrative Ministry of the public sector undertaking.

(11) Subject to the provisions of sub-rule (12) to sub-rule (17), the employees including temporary employees but excluding casual labourers, who opt for permanent absorption in the public sector undertaking shall, on and from the date of absorption, be governed by the rules and regulations or bye-laws of the public sector undertaking.

(12) A Government servant who has been absorbed as an employee of a public sector undertaking shall be entitled to exercise option either,-

(a) to receive pension or service gratuity, as the case may be, and retirement gratuity from the Government for the service rendered under the Central Government in accordance with rule 44 and rule 45; or

(b) to count the service rendered under the Central Government in that public sector undertaking for pension and gratuity.

(13) In the case of a Government servant who has exercised option under clause

(a) of sub-rule (12), the pay which he would have drawn under the Central Government had he not been on deemed deputation shall be treated as emoluments for calculating the pensionary benefits to be paid by the Government and the pensionary benefits in respect of such employee shall be drawn and paid in the manner to be specified by the administrative Ministry of the public sector undertaking.

(14) A Government servant who has exercised option under clause

(b) of sub-rule (12) and his family shall be eligible for pensionary benefits (including commutation of pension, gratuity, family pension or extra-ordinary pension), on the basis of combined service rendered by the employee in the Government and in the public sector undertaking in accordance with the formula for calculation of such pensionary benefits as may be in force in the Central Government at the time of his retirement from the public sector undertaking or his death.

(15)

(a) On retirement from the public sector undertaking or on death of an absorbed employee who has exercised option under clause

(b) of sub-rule (12), the amount of pension or family pension shall be calculated in the same manner as calculated in the case of a Central Government servant retiring or dying, on the same day.

Explanation.- The emoluments or average emoluments for this purpose shall be based on the pay drawn in the public sector undertaking as per Industrial Dearness Allowance pattern.

(b) The pensionary benefits of such employee shall be drawn and paid in the manner specified in sub-rule (18) to sub-rule (26).

(16) In addition to pension or family pension, as the case may be, the employee who opts for pension on the basis of combined service shall also be eligible to dearness relief as per Industrial Dearness Allowance pattern.

(17) If a Permanent Government servant absorbed in a public sector undertaking or a temporary Government servant, who has been confirmed in the public sector undertaking subsequent to his absorption therein, had exercised option under clause

(b) of sub-rule (12), he shall be eligible to seek voluntary retirement after completing ten years of qualifying service with the Government and the public sector undertaking taken together, and such person shall be eligible for pensionary benefits on the basis of these rules.

(18) The Central Government shall create a Pension Fund in the form of a trust and the pensionary benefits of absorbed employees shall be paid out of such Pension Fund.

(19)

(a) The Secretary of the administrative Ministry of the public sector undertaking shall be the Chairperson of the Board of Trustees of the Pension Fund.

(b) The Board of Trustees shall include representatives of the Department of Expenditure, Department of Pension try of Labour and Employment, concerned public sector undertaking, employees of the concerned public sector undertaking and experts in the relevant field to be nominated by the Central Government.

(20) The procedure and the manner in which pensionary benefits to the employees, who have exercised option under clause

(b) of sub-rule (12), are to be sanctioned and disbursed from the Pension Fund shall be determined by the Government on the recommendation of the Board of Trustees.

(21)

(a) The Government shall discharge its pensionary liability in respect of employees who have exercised option under clause

(b) of sub-rule (12), by paying in lump sum as a one time payment to the Pension Fund.

(b) The pensionary liability shall comprise the capitalised value of pension or service gratuity and retirement gratuity for the service rendered till the date of absorption of the Government servant in the public sector undertaking.

(c) Lump sum amount of the pension shall be determined with reference to Commutation Table laid down in Central Civil Services (Commutation of Pension) Rules, 1981.

(22) The manner of sharing the financial liability on account of payment of pensionary benefits by the public sector undertaking to the employees who have exercised option under clause

(a) of sub-rule (12), shall be determined by the Government.

(23) In respect of the employees who have exercised option under clause

(b) of sub-rule (12), the public sector undertaking shall make pensionary contribution to the Pension Fund for the period of service to be rendered by the concerned employees under that undertaking at the rates as may be determined by the Board of Trustees so that the Pension Fund shall be self-supporting.

(24) If, for any financial or operational reason, the Trust is unable to discharge its liabilities fully from the Pension Fund and the public sector undertaking is also not in a position to meet the shortfall, the Government, through the administrative Ministry for the public sector undertaking, shall be liable to meet such expenditure and such expenditure shall be debited to either the Fund or to the public sector undertaking.

(25) Payments of pensionary benefits of the pensioners of a Government Department who retired from that Department before the date of its conversion into a Public Sector Undertaking shall continue to be the responsibility of the Government and the mechanism for sharing its liabilities on this account shall be determined by the Government.

(26) Nothing contained in sub-rules (18) to (25) shall apply in the case of conversion of the Departments of Telecom Services and Telecom Operations into Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited, in which case the pensionary benefits including family pension shall be paid by the Government.

(27) For the payment of pensionary benefits including family pension referred to in sub-rule (26), the Government shall specify the arrangements and the manner including the rate of pensionary contributions to be made by Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited to the Government and the manner in which financial liabilities on this account shall be met.

(28) The arrangements under sub-rule (27) shall be applicable to the existing pensioners and to the employees who are deemed to have retired from the Government service for absorption in Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited and shall not apply to the employees directly recruited by the Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited for whom they shall devise their own pension schemes and make arrangements for funding and disbursing the pensionary benefits.

(29) Upon conversion of a Government Department into a public sector undertaking,-

(a) the balance of provident fund standing at the credit of the absorbed employees on the date of their absorption in the public sector undertaking shall, with the consent of such undertaking, be transferred to the new Provident Fund Account of the employees in such undertaking;

(b) earned leave and half pay leave at the credit of the employees on the date of absorption shall stand transferred to such undertaking;

(c) the dismissal or removal from service of the public sector undertaking of any employee after his absorption in such undertaking for any subsequent misconduct shall not amount to forfeiture of the retirement benefits for the service rendered under the Government and in the event of his dismissal or removal or retrenchment the decisions of the undertaking shall be subject to review by the Ministry administratively concerned with the undertaking.

(30) In case the Government disinvests its equity in any public sector undertaking to the extent of fifty-one per cent or more, it shall specify adequate safeguards for protecting the interest of the absorbed employees of such public sector undertaking.

(31) The safeguards specified under sub-rule (30) shall include option for voluntary retirement or continued service in the undertaking or retirement benefits on terms applicable to Government employees or employees of the public sector undertaking as per option of the employees and assured payment of earned pensionary benefits with relaxation in period of qualifying service, as may be decided by the Government.

What This Means

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Key Points

• 1Applies when a government department is converted into a Public Sector Undertaking (PSU).
• 2All government employees of the department are transferred en-masse to the PSU.
• 3Initial transfer is treated as 'deemed deputation' on foreign service terms without deputation allowance.
• 4Absorption into the PSU takes effect from a date notified by the government.
• 5Focuses on the transition period and the status of employees during that time.

Practical Example

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Cross References

Frequently Asked Questions

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.