On November 19, the seventh pay commission headed by Justice Ashok Kumar Mathur submitted its report to the Union Finance Minister, Arun Jaitely, for his consideration. The recommendations of the report are to be implemented with effect from January 1, 2016 and it is expected to impact 47 lakh central government employees.
Given the importance of this topic from competitive examinations’ point of view, let us look at the some of the important takeaways from the seventh pay commission report and analyse the fiscal impact of the same.
Background:
The central government constitutes the pay commission once in every 10 years with the view to revise the pay scale of the central government employees and the armed forces. With a few modifications, these recommendations are also adopted by states for state government employees.
The 7th Pay commission was constituted in February 2014 with A K Mathur as its chairman and others members being Vivek Rae, a retired IAS officer of 1978 batch, and Rathin Roy, an economist and Meena Agarwal, an IRS officer of 1981 batch.
Highlights
* An overall 23.55 per cent increase is suggested in pay, allowances and pensions of the central government employees depending on ‘Business as usual scenario’. The break-up of this hike is as follows: 16 per cent hike in basic pay, 24 per cent increase in pension and 63 per cent increase in allowances. However, this pay hike fares poorly as compared to the 6th pay commission which recommended 35 per cent pay hike.
* Based on the Aykroyd formula, minimum basic pay of the central government staff is set to be Rs.18000, with the maximum pay for topmost officers, for example the Cabinet secretary, would be Rs. 2. 5 lakh per month in addition to other perks. An annual increment of 3% in basic pay was proposed.
* The implementation of these recommendations are set to impact 47 lakh serving central government employees and 52 lakh pensioners.
* The implementation is expected to have 0.6 per cent impact on India’s GDP. The total financial impact in the FY 2016-17 is estimated to be ₹1,02,100 crore. Out of this amount, pay would constitute Rs 39,100 crore, allowances would constitute Rs 29,300 crore and pension would constitute Rs 33,700 crore. Out of the total financial impact, ₹73,650 crore will be met by through the General Budget and ₹28,450 crore by the Railway Budget.
* An implementation secretariat is to be created, headed by the expenditure secretary and a separate empowered committee will be formed under the cabinet secretary with an objective to consider suggestion and inputs given by various stakeholders.
* Pay band and grade pay has been dispensed and new pay matrix has been designed. The stature of the employees, which was previously determined grade pay, will now be determined by the level in pay matrix. Separate pay matrixes have been designed for defence personnel, military nursing services and civil services.
* The commission further suggested abolition of 52 allowances and submerged 36 allowances in existing or newly proposed allowances.
* The Military Service Pay, which is a compensation for the various aspects of military service, will be admissible to the Defence forces personnel only and it will be payable to all ranks up to and inclusive of Brigadiers and their equivalents.
* The recommendation suggested for each defence personnel, no matter what the year of retirement, should draw the same amount for pension.
To read the full report of the 7th pay commission you may visit – http://finmin.nic.in/
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