Thursday, September 26, 2013

Government announces Seventh Central Pay Commission

The government announced the setting up of the Seventh Central Pay Commission (CPC) ahead of elections, heralding the prospect of salary increases for nearly 80 lakh employees and pensioners, although the actual revisions will take about three years or so and could put finances under strain at the time. 

"The average time taken by a Pay Commission to submit its recommendations has been about two years. Accordingly, allowing about two years for the 7th CPC to submit its report, the recommendations are likely to be implemented with effect from 1.1.2016," Finance Minister P Chidambaram said in a statement issued by the government on Wednesday. 

The Sixth Pay Commission came into effect on January 1, 2006. Prime Minister Manmohan Singh has approved the constitution of the Seventh Pay Commission, Chidambaram said in the statement. The commission's terms of reference and its members will be announced later. Five state governments go to the polls in November while general elections are expected to be held in May next year. 

The government constitutes a pay commission almost every decade to revise the pay scales of its employees, who get an inflation-linked dearness allowance twice a year but no salary revisions as in the private sector. 

State governments usually adopt the recommendations after suitable modifications. The commission award tends to impose a significant burden on government finances. 

Central government spending on salaries and allowances of just the civilian employees (those who don't belong to the defence services) rose nearly 40% in 2008-09 after the Sixth Pay Commission award from a year before. 

The higher spending came just as the global financial crisis broke, forcing the government to announce measures to prop up growth. The fiscal deficit rose to 6% in 2008-09 and 6.5% in 2009-10 from 2.5% in 2007-08, a slippage the government has still not managed to rein in. Chidambaram last year announced a road map to trim the fiscal deficit to 3% of GDP in 2016-17. 

Although higher salaries will mean more disposable income in the hands of government employees, the pay commission award could burden government finances and push back the fiscal recovery. 

"No doubt, the Seventh Pay Commission will lead to demand increase in the economy, but it will lead to consumption-led and not investment-led growth," said Devendra Kumar Pant, chief economist, India Ratings. "If in 2.5 years, the economy does not recover, in terms of growth and fiscal deficit, it will be a big load for the centre and states." 

Trade unions welcomed the constitution of the commission but demanded that they be set up every five years. Congress party general secretary in charge of communication Ajay Maken welcomed the setting up of the pay commission on Twitter. "The government should attract best of talents...Pay commissions help in attracting and also retaining best available talents," Maken said. 

Planning Commission member Arun Maira said at a Ficci seminar in Kolkata: "All government employees will want it while others may not... This is a big election force... It is an interesting situation since it is election time."

by the kind courtesy of The Economic Times


  1. Two days after Pay Panel announcement, all central staff will be surprised and joyful since one of their long pending demands is going to see the light of the day, perhaps after a long gap, two years plus. But one must bear in mind the background situation in announcing this set up at a time when the govt. was racking its brain over the failing economic situation and opting for austerity measures to be followed in the govt. department and recently circular has also been issued on this subject. The UPA was aware that this their last rule of the country and next election is going to be fiasco for them. Just to save their face, govt. employees vote bank will come in handy for its survival. The timing of the announcement itself is a signal for their psychological fear of losing the forthcoming elections Further, before announcing the news, the govt. consulted the 13 Finance Commission and as per their instruction, the govt. announced that the recommendations will take effect from Jan.2016, that means this time no employee is going to get even a paisa as arrears.No hefty amount will be recommended and even on average calculation the increase will be far less than the previous one that is to say, between 15-20%. Beyond this, further increase is a pipedream. To cap this, the govt. is still adamant in merging fifty percent of DA with the basic on the plea of absence of recommendation by 6th pay panel. Hence I request all central staff to unite under a single umbrella and organise a struggle to see that the pay panel is given effect from 2011 if not at least Jan.2013, that is the year of announcement, (2) merge 50% DA (3) announce interim relief till recommendation are implemented, (4) increase the bonus ceiling from the present one to the present basic pay plus GP (5) revise the pension eligibility from half of the last pay drawn to full pay, etc.

  2. 1] the defences forces are not crude up in pay +pension cases as per their counter part
    2[ the IAS take recommendation of all & add the goods one in their pay scales irrespective of job ,so they are always better off
    3] we were above IAS & no so much downgraded that even NFU status has not been given till now
    4] first get NFU status as 6 th CPC will be basis for 7 th CPC
    5] no need to have separate armed forces commission .. keep IAS scale & benefits same for defence forces+ add MSP + difficult areas allowances,,, 6]defences forces will always be above IAS then & respect regained