6th Pay Commission to see pay hikes by 40%

It is really a 28% effective increase in the maximum slab. If you look at the maximum slab, there is an increase of up to 40% and 35% for the Cabinet Secretary rank. If you discount the 12% DA, which occurred in 2004, it is really an increase of 28%.

As far as the fiscal is concerned, Rs 25,000 crore is what the government anticipated in terms of provisioning for the Pay Commission impact. That is pretty much Rs 26,000 crore which is the bill for the Pay Commission. Rs 18,000 crore is the one time arrear, because this scheme is going to be implemented from January 1, 2006. The bill for Pay Commission impact for ’08-’09 is around Rs 7,500 crore. So, Rs 26,000 crore is something that the FM has reiterated in his Budget, that he has got enough fiscal room to manipulate and operate.

The point is there is a larger concern here. There is always a clamour among state government employees that a similar award should be given to them. If that happens, the already precarious state of finances in state governments could be even more precarious and that is something that is going to be really top of mind for state government employees.

Also, the only positive sign for the UPA government is they would like to showcase this in an election year. But interestingly when we spoke to government employees they were not really happy, essentially perhaps because effectively if you take the DA out, it is not really a hefty bonanza as many thought it would be. Also, given the price rise and inflation issues, most people are saying it is really not that sufficient.

Most of these recommendations are implemented. But the point is, if the FM has a problem with any of the observations or with the impact of the Pay Commission recommendations, he might even send this back to the Pay Commission for another round of iteration. In that case, some amendments are made that come back to the Finance Ministry and then it goes back to the Cabinet for approval. If that happens, it could delay the process by about 1-2 months.

Given the fact that finances are comfortable and Rs 26,000 crore is the bill, which is pretty much the anticipated provision amount, one doesn’t really anticipate that kind of iteration going forward. It is an election year and they want to finish off this kind of a populist announcement as soon as possible.

A central government employee will earn up to 40% more if the government accepts the Sixth Pay Panel's proposals. This pay hike would affect the lives of over 4 million central government employees and could trigger off similar pay hike across state governments as well.

Justice Srikrishna, Chairman of the Pay Commission, says recommendations have also been made to improve productivity.

“We have talked of market driven compensation at the top level, where you have expert persons required by the government. There should be open competition with the public. If they have a better candidate from outside, he should be appointed instead of simply promoting people by seniority,” said BN Srikrishna.

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