Rs30,621 cr bonanza for babus

NEW DELHI: After farmers and taxpayers, the centre is all set to play Santa Claus to another big constituency, the four-million-plus army of government employees.

The sixth pay commission, headed by justice BN Srikrishna, has recommended an average hike of 40% in salaries and a doubling of most allowances that would cost the exchequer Rs12,561 crore in 2008-09 alone. Count the arrears of Rs18,060 crore payable to employees from January 1, 2006, and the largesse adds up to Rs30,621 crore. The arrears may be paid in instalments.

The commission has been particularly kind to the armed forces. It has recommended an unprecedented military service pay (MSP) for all personnel up to the rank of brigadier and equivalent, giving them significantly higher salaries than their civilian counterparts.

The salary hikes for government employees are more significant at senior levels and moderate at lower levels, raising protests from the unions. The cabinet secretary’s basic pay will move up from Rs30,000 to Rs90,000 a month, with secretaries to the government getting Rs80,000 (up from Rs26,000).

Since the real benefits to government employees are perquisites, the annual cost to the government could be more than three times that amount. According to a Xavier Labour Relations Institute (XLRI) study, which attempted to work out the real cost to government (CTG) of its employees, the CTG is 3.22 times basic pay at senior levels. This means the real monthly CTG of the cabinet secretary is around Rs2.89 lakh, or Rs34 lakh-and-odd annually (see table, page 13).
Private sector CEO salaries are, of course, much higher – in crores, rather than lakhs – but as against this one has to weigh the intangibles of government service, including job security, and sprawling bungalows in Lutyens’ Delhi, complete with liveried attendants. The cabinet secretary’s bungalow, for example, is conservatively estimated at Rs4-5 lakh in terms of monthly rental value. Add the cost of chauffeurs, a residential office and staff on 24-hour duty, and the hidden perks are not insubstantial.

Among the other recommendations are a retention of the retirement age at 60, a reduction in the number of grades to 20 against the present 35, 3.5% annual increment for high performers (against the normal 2.5%), and making all fixed allowances inflation-proof.  

The panel recommended a continuation of the five-day week for central employees and said that government offices should remain closed only on three national holidays. All other gazetted holidays should be abolished, the commission said.

Immediately after submitting the report to finance minister P Chidambaram, justice Srikrishna said: “I have recommended something which is good for the nation.” He told the finance minister that his “recommendations will displease everybody... A judgment which displeases everybody is a good judgment.”

The immediate reaction from government employees has been unenthusiastic. The hikes suggested do not meet their expectations, leave alone close the gap with their private sector counterparts. Many employees in the lower and middle ranks said their actual salary increase would be 20-30%.

According to the recommendations, the highest salary in the government would be that of the cabinet secretary and the chiefs of army, navy and air force at Rs90,000 a month. The minimum salary at the lowest level of government would now be Rs6,660.

The difference between the lowest paid and the highest paid central government employee would be 13.5 times. In the last pay commission, it was 11.8 times.

The commission has compressed the 35 pay scales existing in central government to four distinct running pay bands, apart from an apex scale for secretaries and another one for the cabinet secretary and service chiefs. And the total number of grades, presently represented by pay scales, has been brought down to 20. “Every post, barring that of secretary or equivalent and cabinet secretary equivalent, is to have a distinct grade pay,” the commission has said.

The commission has recommended six-months of maternity leave to women, and improving facilities for those with disabilities.

The annual increments would be 2.5% of total pay and the corresponding grade pay. But for Group A – the officer cadre — it will vary depending upon performance. High performers among officers, not exceeding 20% of the total employees in a grade, would be given annual increments at 3.5%. The commission has also called for a ‘performance-related incentive scheme’ under which employees will be eligible for pecuniary remuneration over and above the pay. The proposed scheme would replace the ad-hoc bonus scheme immediately, and eventually the productivity-linked bonus.

Acknowledging the increasing number of ageing pensioners, the commission has recommended higher rates of pension for retirees and family pensioners on attaining the age of 80, 85, 90, 95 and 100 years.

The commission has also recommended liberalisation of retirement policies. It has recommended a pension of 50% of the last pay, without linking it to the existing 33 years of qualifying service, for grant of full pension. It has also recommended a “liberal severance package for employees quitting after 15 to 20 years of service”.

The commission has also recommended recruitment of outsiders to fill vacancies, if they are without suitable candidates from within, at joint secretary and additional secretary ranks.

Justice Srikrishna clarified that though the annual cost of his recommendations would be Rs12,561 crore, savings of Rs4,586 crore could accrue through the implementation of various measures suggested by the panel, thus bringing down the net financial implication to Rs7,975 crore. The biggest saving of Rs1,800 crore could come from lateral movement of defence forces personnel to central paramilitary forces, followed by Rs1,000 crore on account of rectification of commutation of pension formula.

(With agency reports)