Seventh Pay Commission: Expectations and Controversies
Latest Updates: The Union Cabinet has approved the recommendations of the Seventh Pay Commission on 29 June, 2016. As many as 47 lakh central government employees and 52 lakh pensioners stand to benefit from the implementation of Seventh Pay Commission recommendations and they are expected to get their revised salaries from August, 2016 onwards
All CentralGovernment employees, including defence personnel keenly await the Seventh Pay Commission. Since Independence, India has had seven Pay Commissions put up to review the existing costs, inflation and other impact costs and make suitable revisions to the salary structure of central government employees.
The Seventh Pay Commission
On 24 February 2014, the Government of India issued a Gazette notification announcing the formation of the Seventh Central Pay Commission with Justice A.K.Mathur as the Chairman, Vivek Rae – Member (full time), Dr. Rathin Roy – Member (part time), and Meena Agarwal – Secretary. The Seventh Pay Commission had to submit its recommendations within 18 months (expected by August 2015) and the same is to be implemented from 1 January 2016.
The ‘Terms of Reference’ was to examine, review, evolve and recommend changes regarding the emoluments structure comprising pay, allowances, facilities and benefits – in cash or kind. The Commission has been asked to examine the existing scheme of bonus and its bearing on productivity and performance, examine the incentive scheme to reward performance, productivity and integrity, and examine the pension scheme along with other retirement benefits that will impact:
- Central Government employees – industrial and non-industrial
- Personnel belonging to All India Services
- Personnel of the Union Territories
- Officers and employees of the Indian Audit and Accounts Department
- Members of regulatory bodies (excluding RBI) set up under Acts of Parliament
- Officers and employees of the Supreme Court
- All employees of Defence Forces
Also Visit – Key Highlights of 7th Pay Commission Report: Salary to go up by 23.55%; allowances by 63%; pension up by 24%
The Commission is mandated to make recommendations based on current:
- Pay structure, associated benefits and existing retirement benefits.
- Economic conditions prevailing in the country and fiscal prudence.
- Adequacy of resources to meet various welfare measures and developmental expenditures.
- Impact on State Government finances as most states adopt recommendations made by the Commission with some revisions as per their priority.
- Best global practices and adopt the same.
Pay Commissions Over the Years
Stakeholders have been debating the level of salary increase expected prior to each Pay Commission recommendations.
The First Pay Commission chaired by Srinivasa Varadachariar, was formed in January 1946 and submitted its recommendations in May 1947 to the then interim government.
The Second Pay Commission in August 1957 and submitted its report in 1959. The Pay Commission was headed by Jagannath Das and its central theme was to ensure smooth government functioning by recruiting persons with minimum qualifications, to give more people an opportunity to join government services.
The Third Pay Commission, headed by Raghubir Dayal, was established in April 1970 and submitted its report in March 1973. Coming in the wake of an expensive war with Pakistan, the Pay Commission made its mark by adopting a different approach from the first two commissions, which focussed on pay being kept at minimum subsistence levels. The commission, for the first time, referred to the need of ensuring that the pay structure incorporated concepts of adequacy, comprehensiveness and inclusiveness to ensure a fair compensation. This approach cost the government Rs 1.44 billion, which was a significant escalation in cost at the time.
The Fourth Pay Commission chaired by PN Singhal was set up in June 1983 and submitted its recommendations in three phases, over a four-year period.
The Fifth Pay Commission chaired by Justice S. Ratnavel Pandian was set up in 1994. This Commission left its mark as its recommendations had a major impact on not just central, but for the first time, on state governments. Its recommendations resulted in an increase in central government expenditure, including salaries, pensions and other related costs by 99%, and state governments’ by 74%. The dramatic increase in expenditure created a major controversy with 13 states failing to fulfill their salary obligations and seeking central assistance.
Amongst other radical recommendations was to reduce the central government staff levels by 30%. The Commission furthered suggested that the government should not fill the 3,50,000 job vacancies. Even the World Bank expressed surprise over the cost escalation and radical level of reforms suggested. The government, however, did not accept any of the recommendations made.
The Sixth Pay Commission chaired by Justice BN Srikrishna was appointed on 5 October 2006 and submitted its recommendations on 24 March 2008. The Commission made the following recommendations:
- Special pay scales for Secretary to Government of India posts and Cabinet Secretary.
- Introduction of four distinct running pay bands, with one running band each for Group ‘B’ and ‘C’ employees, and two running bands for Group ‘A’ posts.
- Total number of grades running across four distinct pay bands be reduced to 20 from the earlier 35.
- Defence Forces be allowed running pay bands and grade pay on par with civilians.
- Introduction of Performance Related Incentive Scheme (PRIS).
- Pension to be paid at 50% of average emoluments or the last pay drawn.
Controversies Regarding Seventh Pay Commission
Inter-service rivalries extend to salaries and benefits received by certain services. There is widespread resentment against the IAS officers, who are seen to be favoured by most pay commissions. The Indian Revenue Service has raised objections to an IAS Officer being included as part of the Seventh Pay Commission since there is no representation from their side. The IRS lobby believes that they have a right to be on par with the IAS since the revenue for the government is collected by them.
Same stands true for the Defence Forces. For many years, the senior most positions in all three forces have been downgraded progressively, in terms of promotions, salaries and benefits, while the IAS lobby has progressively increased its stature, promotions, emoluments and benefits, as compared to what senior Defence Officers received.
Furthermore, the Defence Forces have a long standing demand (and rightly so) for a representation from the Services on the Pay Commission, especially since the role, responsibilities and risks of work are unique to the forces and thus require a qualified representative who understands the nature of work and can thus make suitable recommendations on the basis of that. This demand has been strongly resisted by the IAS lobby all these years.
It remains to be seen how the present government deals with demands of its employees from different arms when setting up the Eighth Pay Commission subsequently.
Macquarie India: Seventh Pay Commission may be implemented from Mid-2016
Macquarie India has said that the seventh pay commission is likely to be implemented from mid 2016. Rakesh Arora, Managing Director and Head of Research of Macquarie India said that it is still uncertain that the new pay commission will be implemented in next six months as the 6th pay commission took 2.5 years to be implemented.
Report on Seventh Pay Commission to be submitted on 19 November
As per sources, the recommendations of the 7th Pay Commission are likely to be submitted to the Finance Minister on 19 November 2015. It is also believed that the new Pay Commission is likely to hike salaries of the central government employees and pensioners by only 15%, which is much lower than the 35% hike implemented in the 6th Pay Commission in 2008. The 7th Pay Commission came into effect from 1 January 2016.
Seventh Pay Commission Likely to Increase Salries by 40%
As per an analyst from Credit Suisse, the seventh pay commission is likely to raise the salaries of the government employees for about 40%. He also said that as one –third of the middle class are employed in government job, the hike will boost “discretionary spending”. He also added that the hike will boost the real estate market especially in Tier 3 and Tier 4 cities.
Rs. 70,000 crore provisioned for Seventh Pay Commission in 2016 Budget
A top finance ministry official confirmed the allotment of Rs. 70,000 crore for Seventh Pay Commission in the Union Budget 2016-17. The sum would be used for implementation of Seventh Pay Commission for all government employees. It is estimated that the implementation of pay commission report would cost the government, a sum of Rs. 1.02 lakh crore.
For further information on 7th pay commission, please log onto official website: http://7cpc.india.gov.in/
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