The Sixth pay commission was constituted in 2006 and in the normal course, the government was expected to announce the next pay commission after a gap of 10 years. The fifth came in 1996. But with the UPA government’s image battered by a spate of corruption scandals, the date had been advanced by two years in order to recover some lost ground with the electorate.
The UPA government justified the early constitution of the commission on the ground that it will take around two years to submit its recommendations. The Sixth pay commission, for example, was constituted in October 2006 and the Centre implemented it ahead of the 2009 Lok Sabha elections, showering central government employees with a big pay hike bonanza.
The Sixth pay commission had recommended a 20 to 40 per cent jump in salary. This cheered the employees, but wreaked havoc with the government’s finances as the fiscal deficit soared to 6 per cent of the gross domestic product (GDP). The consequent burden of arrears on the central government was Rs 28,160 crore on a salary base of Rs 44,360 crore.
The cash-strapped government had disbursed the arrears in two instalments with 40 per cent given out in 2008-09 and 60 per cent in 2009-10. The arrears contributed significantly to the Centre overshooting its target in 2008-09, ending the year with a fiscal deficit of 6 per cent of GDP against the budgeted 2.5 per cent.
The fiscal deficit rose to 6.4 per cent of GDP in 2009-10 as pay commission arrears pushed up the expenditure at a time when the government was battling slowdown in revenues. With the Seventh pay commission, the situation is headed in the same direction and the country will eventually have to face the music of this populism.
Accordingly, the Seventh Pay Commission is likely to offer realistic view on increase of salaries and allowances of central government employees.
The pay panel may definitely bring also toll on the exchequer as government has to manage expenditures of One Rank One Pension (OROP) for ex-sevicemen before Seventh pay commission expenditures.
It is expected that the central government’s salary bill will rise by 9.56% to Rs 1,00,619 crore after Seventh pay commission will come into effect.
This OROP announcement will have a significant impact on Seventh pay commission report badly, especially in salary hike and increasing allowances,” said a pay panel official.
“We have to look financial health of government before submitting our report. We have to save financial position of government to run the nation smoothly. We are not only to work for pay hike.” he added.
However, the recommendations of Seventh Pay Commission, may be implemented by NDA government before the announcement of West Bengal, Assam, Kerala and Tamil Nadu states assemblies’ election in May 2016.
“The central government will decide execution time of the pay commission’s proposals after the pay panel submits its report, which will be possible pre-election “special packages” for West Bengal, Assam, Kerala and Tamil Nadu, which are all due for polls by May 2016,” an official of the Finance Ministry said, speaking on condition of anonymity.
The Seventh Pay Commission is likely to submit its report in December. The Commission has already completed discussions with various stakeholders, including organisations, federations, groups representing civil employees as well as Defence services and is in the process of finalising its recommendations.
The recommendations of the Seventh Pay Commission are scheduled to come into effect from January 1, 2016.