Challenges before the Seventh Pay Commission

Feb 18 2014, 04:05 IST
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SummaryGrowth has fallen in the last couple of years eroding revenue while inflation remains stubbornly high. The new pay commission will have to factor in both concerns

Why does the government appoint a pay commission every decade?

A pay panel is appointed every decade to review and recommend the pay structure for central government employees taking into account various factors such as cost of living, inflation rate, revenue growth and fiscal deficit of the government, growth in workforce, private sector job scenario and wages, and economic growth. The government has so far appointed six pay commissions. The demand for a permanent pay commission set up through an Act of Parliament has been raised once but it was not accepted by the government.

Earlier this month, Prime Minister Manmohan Singh approved the constitution of the Seventh Pay Commissionto be headed by retired Supreme Court judge Ashok Kumar Mathurto suggest the extent of hike in salaries of the 7-million-plus central government staff and pensioners with effect from 2016. Petroleum secretary Vivek Rae has been appointed as a full-time member, NIPFP director Rathin Roy will be part-time member and Meena Agarwal will be member-secretary of the new pay panel.

How did the process of pay hikes evolved?

The pay panel recommendations have evolved with time. The first central pay commission (CPC) adopted the concept of living wage to determine the pay structure of the government staff. The third CPC adopted the concept of need-based wage. The fourth CPC had recommended that the government constitute a permanent machinery to undertake periodical review of pay and allowances of its employees, but this was not accepted by the government. The sixth CPC suggested performance related incentive scheme (PRIS) to replace the ad hoc bonus and productivity-linked bonus schemes. The pay panel also suggested that the running pay band be extended to all grades of officers. Also, the sixth pay panel suggested slashing of the number of grades to 20 and one distinct pay scale for secretaries from the 35 existing earlier.

By how much have the public sector salaries increased every decade following the pay panels recommendations?

By and large, the salaries of central government staff have tripled every decade. The sixth CPC suggested 3 times increase in salaries from that of fifth CPC levelsit was 2.6 times for lower grade officials and slightly above 3 for higher grade staff. The increase in salary during fifth CPC was 3-3.5 times the fourth CPC levels.

What has been the fiscal implication of pay hikes?

Government finances have come under strain after implementations of each CPC. After the fourth CPC, the combined

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