Finance Secretary D C Gupta on Wednesday said that the government will consider issuing long-term government securities if there was demand from investors such as insurance companies.

"We have now issued papers up to 25 years. We are willing to consider issuing even longer dated papers but it will depend on demand from industry and has to be done in consultation with the Reserve Bank of India," Gupta said on the sidelines of at an insurance seminar organized by Ficci.

He also said that the Centre proposes to introduce the contributory pension system for its employees from January next year though it is yet to decide on the level of foreign investment level in the sector.

The new regime will increase the pension bill of the government initially but it will come down in the long term, Gupta said.

"It will be a defined contributory pension system. Employees will have the options of portability (switch from one scheme to another) and making their investment choice," he said, adding the finance ministry has estimated that pensioners would get a higher return through the new scheme. The fund managers will be selected through a competitive bidding process.

Employees can choose the investment pattern on their pension fund from safe, balanced and growth schemes depending on the debt and equity exposures.

"The new scheme will be applicable for government officials from January 1, 2004. It will also be applicable for private players. We expect large number of corporates to join after the entire mechanism is in place," Gupta said.

The government proposes to put in place the Central Registry Authority and a regulator for the pension business by the end of the year.

While government will make matching contribution for its employees, Gupta said corporates would be free to make any proportion of contribution for its employees.

Government has passed a resolution of the new pension regime and constituted a Pension Fund Regulatory & Development Authority, which would lay down the norms for the sector.

The finance secretary also indicated that state governments are keen to join the new pension system considering their unsustainable pension liabilities.

The pension bill of states have mounted to Rs 24,000 crore (Rs 240 billion) while the entire salary bill was about Rs 36,000 crore (Rs 360 billion). "This way it is increasing, it is difficult to sustain," he said.

Gupta said the chairman and other members of the new interim pension regulator would be appointed soon while the Central Registry Authority would be put in place shortly.

He said the new pension system would co-exist with the present employees provident fund organisation. "There will be no overlapping with EPFO," Gupta said.