In far-reaching reform measures to the salary structure of an estimated 4.5 million central government employees, the sixth Pay Commission report submitted to the finance ministry today recommended an across-the-board effective salary hike of about 28 per cent, performance-linked increments, fewer holidays and a new medical insurance scheme.
It also recommended that the reimbursement of education allowance be raised from Rs 50 to Rs 1,000 per child per month, subject to a maximum of two children.
The allowance will be available irrespective of an employee's position in the government, a path-breaking departure from the current system of linking allowances to an employee's grade.
The new pay scales will cost the exchequer Rs 12,561 crore extra in 2008-09, but due to savings of Rs 4,586 crore on account of various measures suggested in the report, the net outgo during the year will be Rs 7,975 crore.
The retrospective revision of salaries effective January 1, 2006, will entail an additional one-time burden of Rs 18,060 crore on arrears. The arrears are likely to be given in installments.
"The overall hike works out to 40 per cent over the last Pay Commission. If one includes the last dearness allowance (DA) hike given in 2004, the effective hike works out to 28 per cent," said Justice B N Srikrishna, chairman of the commission.
Under the terms, the Commission ceases to exist from today. A core group of two or three officers from the Commission secretariat will form an implementation cell in the finance ministry to examine the report.
The report will then be considered by the Committee of secretaries headed by the Cabinet Secretary and the final recommendations will be put up for Cabinet approval. The exercise is expected to take at least three months.
According to the Commission the suggestions have been made with a view to improving delivery mechanisms in the government to provide better services to the common man.
In what has been termed as an "attempt to remove stagnation", the Commission has recommended four running pay bands for all categories of jobs. As a result the number of pay scales has been reduced to 20 from 35.
While a clerical-level employee said the real benefit to his cadre would come from the grade pay that will be in addition to the pay band, a secretary-level official pointed out that the hike needs to be seen in a historical perspective.
"In 1947, a secretary to the government earned a fixed sum of Rs 3,000 a month, which if adjusted against inflation over the years, would work out to more than Rs 3 lakh a month. The suggested hike is good but not over the top", he added.
The commission also called for a new medical insurance scheme which will be optional for existing employees and pensioners and compulsory for new recruits.
The maximum contribution of the employee towards the premium payment will be 30 per cent. The scheme will run parallel to the Central Government Health Scheme.
The Commission has also restricted the number of official holidays to 3 from 14 and called for the abolition of all other gazetted holidays. As compensation, the number of restricted holidays has been increased from 2 to 8 days a year.
Another major suggestion is to end the monopoly of the Indian Administrative Services (IAS) in top posts.
The real change is in annual increments, which would be performance-linked, 2.5 per cent of pay for everybody and 3.5 per cent for high performers (outstanding to be restricted to 20 per cent of total). This will encourage high performers in the government.
