Deferment to help Centre save Rs 60K crore
The government may delay a revision of allowances recommended by the Seventh Pay Commission by two years to 2018-19, thus, saving close to Rs 60,000 crore (Rs 600 billion).
The empowered committee of secretaries, which is examining the Seventh Pay Commission’s suggestions, is likely to present its report to the Union Cabinet for approval in early July on what recommendations the government can implement.
While the pay and pension revisions look likely to be implemented for more than 4.7 million government employees, the revision in allowances could be delayed by two years.
Officials cited the example of the Sixth Pay Commission, when pay and pensions were revised from 2006-07 but allowances were revised from 2008-09.
“While pay and pension revisions may be implemented subject to Cabinet approval, revision of allowances may be delayed by two years. This was done with the last Pay Commission as well,” an official said.
The total financial impact of all the Seventh Pay Commission recommendations in 2016-17 is likely to be Rs 1.02 lakh crore (Rs 1.02 trillion).
The increase in pay in estimated to be Rs 39,100 crore (Rs 391 billion), allowances Rs 29,300 crore (Rs 293 billion) and pension Rs 33,700 crore (Rs 337 billion).
A deferred increase in allowances could save the exchequer Rs 58,600 crore (Rs 586 billion) over the next two years.
Finance Minister Arun Jaitley had said before the 2016-17 Budget he would provide Rs 1.1 lakh crore (Rs 1.1 trillion) for spending commitments due to recommendations of the Seventh Pay Commission.
The Budget has provisionally provided Rs 1.06 lakh crore under this head.
A status quo on allowances will also allow the government to ignore a demand by various staff associations to raise the minimum salary.
The Central Pay Commission has suggested that the minimum should be Rs 18,000 per month and unions have demanded it be raised to Rs 19,000-21,000 a month.
About 70 per cent of government employees are in non-executive ranks. Even a modest increase in their pay will inflate the government’s salary bill by Rs 50,000 crore (Rs 500 billion) annually.
As oil prices climb from the lows of 2015, a government committed to large capital spending and facing a rural slowdown could do with the savings.
The government has allocated nearly Rs 2.5 lakh crore (Rs 2.5 trillion) for infrastructure and has boosted spending on schemes like the Pradhan Mantri Krishi Sinchayee Yojana, Rashtriya Krishi Vikas Yojana and National Rural Employment Guarantee Scheme after two years of drought.
The Centre is also planning to inject Rs 10,000-12,000 crore (Rs 100-120 billion) in public sector banks during 2016-17 over and above the Rs 25,000 crore (Rs 250 billion) provided in the Budget to tide them over mounting bad loans.
NOT HITTING PAY DIRT
- Govt finalising pay panel recommendations
- Pay, pension set to be revised; allowances may be deferred to 2018-19
- Govt report on pay panel to seek Cabinet nod in early July
- Centre could save nearly Rs 60,000 crore by deferring allowances
- Allowance rise as projected by the pay panel stands at Rs 29,300 crore for FY17
Image: A private money trader counts Indian Rupee currency notes at a shop in Mumbai. Photograph: Vivek Prakash/Reuters