Revised allowances including house rent allowance (HRA) will likely be announced for the central government staff after the ongoing Budget session of Parliament is over on April 12. The finance secretary-led panel, which is giving final touches to the reworked allowances based on the 7th pay panel’s recommendations, will hold its final meeting shortly, sources told FE. The panel met for over three hours on Wednesday to deliberate on the subject. “Decisions are broadly taken on allowances pending a final review. But these will be announced only after current Budget session ends on April 12 to avoid any controversy,” another source said. In the case of the employees in metro cities, the panel was considering to make HRA a little more generous than the CPC’s award. Taking note of employees’ representations, the finance secretary-led panel was looking at HRA of 30% of basic pay for those in cities with a population of over 5 million, against 24% recommended by CPC. In the Sixth CPC award period (2006-2015), HRA was 30% for these cities. HRA accounts for about 60% of the total allowances bill.
The secretaries’ panel is reviewing the commission’s recommendations pertaining to allowances including rationalisation of some 196 existing benefits. The pay panel has suggested the abolition of 52 benefits and merger of 36 with existing ones to end their separate identities. The financial implication of revised allowances would be broadly in line with the CPC’s estimate of around R29,300 crore (including for the railways) in the first year. While the revised pay and pension was implemented from January 1, 2016, allowances will be implemented prospectively. The delayed implementation of allowances have saved the government nearly R33,000 crore in 15 months.
With just R4,500 crore additional allocation in the Budget (excluding armed forces for which no separate data is usually provided) for allowances and assuming R7,600 crore expenditure would be borne by the railways, the additional allocation required from the general Budget could be around R15,000 crore in 2017-18. “This additional requirement could be met largely from savings from allocations made to various departments for the year,” a third source said. The Union Budget size is R21.47 lakh crore for next fiscal year.
On June 29, 2016, the government accepted the pay- and pension-related recommendations of CPC for over 10 million central government staffers and pensioners, entailing additional cost of R84,933 crore in 2016-17. In the 2017-18 Budget, the government has not explicitly provided for additional costs to be incurred after implementation of the revised allowances under CPC. The Centre’s allowance expenditure is pegged at R69,222 crore (excluding defence) in FY18, just 7% higher than R64,677 crore in FY17, factoring in business-as-usual growth in expenditure.
Many government employees see the formation of the secretary panel itself as a delaying tactic. The delay in implementation has helped the government save on additional costs towards allowances in 2016-17 and redeployed the resources to give a spending boost of R36,000 crore to various programmes. Unlike pay and pension, allowances are paid prospectively. Salary revision took effect from January 1, 2016. The pay panel had given an overall 23.55% increase in pay, allowances and pensions, including 16% pay rise, 63% surge in allowances and 23.6% increase in pension.