1. 7th Pay Commission bonanza: How govt will save Rs 11,000 crore in allowances

7th Pay Commission bonanza: How govt will save Rs 11,000 crore in allowances

Allowances currently are roughly half of the Centre's salary bill; as per the pay panel award, the steepest increase — 63% — was in allowances, while the overall rise in pay, allowances and pensions recommended was 23.55%.

By: | New Delhi | Updated: April 25, 2016 10:11 AM
7th pay-L The Centre’s additional bill on allowances in FY 17 due to the pay panel would have been about Rs 22,000 crore, but since it would release allowances only from September (and not with retrospective effect from January as envisaged by the commission), the actual outgo would be nearly half that.

The Centre is likely to implement the Seventh Pay Commission award from September-October, the beginning of the festive season, to give a consumption boost to the economy. However, in order to restrict the budgetary outgo, it would pay the revised allowances only prospectively, unlike the pay component that will be paid along with arrears from January 2016.

Allowances currently are roughly half of the Centre’s salary bill; as per the pay panel award, the steepest increase — 63% — was in allowances, while the overall rise in pay, allowances and pensions recommended was 23.55%.

If the revised allowances take effect only from September this year, the savings to the exchequer would be to the tune of Rs 11,000 crore, official sources told FE. Additionally, if the railway ministry decided to toe the Centre’s line, the national transporter will save around Rs 3,800 crore. The Budget in February had provided Rs 53,500 crore towards the pay panel-induced overall rise in pay, allowances and pension (PAP) and also to finance the one-rank-one-pension scheme for the armed forces. The commission had estimated the additional outgo in FY17 due to its award at Rs 73,650 crore.

The Centre’s additional bill on allowances in FY 17 due to the pay panel would have been about Rs 22,000 crore, but since it would release allowances only from September (and not with retrospective effect from January as envisaged by the commission), the actual outgo would be nearly half that.

Some analysts reckon that the consumption stimulus to the economy from the increased pay to government staff this time around could be somewhat muted.

Compared with the Sixth Pay Commission award — which led to an overall salary increase of 40% and was released first with arrears of 30 months paid over two years — the disbursement now includes only six months’ arrears in pay, they noted. “If the pay commission’s award is implemented across the board (including state governments as well as public institutions/enterprises), it would bring in an additional 0.9% of GDP growth in FY17,” said NR Bhanumurthy, professor at the National Institute of Public Finance and Policy. Even if states lag in implementing the pay revisions, Bhanumurthy said, GDP growth still could be at least 8% in the current fiscal, up from likely 7.6% last year.

Contrary to some reports that government employees could be asked to put part of the increased salary in bank capitalisation bonds to be issued by the Centre to infuse capital in the banks, officials said there was no such move. The government would like the employees to spend additional money in their hands to perk up the economy, sources added.

The seventh pay panel had projected the railways budget would bear the additional Rs 28,450 crore in FY17 due to its award. However, officials reckon that the actual requirement could be lower by about Rs 3,800 crore for the railways due to prospective implementation of allowances.

pay-commission

  1. A
    Akhilesh
    Nov 26, 2016 at 7:44 pm
    Try to save money by avoiding rallies and tours of political leaders.
    Reply
    1. A
      Akhilesh
      Nov 26, 2016 at 7:37 pm
      Why there is late on new allowances, is it the way to save money by making late to allowances. Ridiculous , plan of Modi government
      Reply
      1. M
        Murti
        Apr 24, 2016 at 7:40 am
        Every one wants his work on time. But by not deciding on pay commission on time Government denied employees due. And you say it is saving??
        Reply
        1. N
          Nitesh Singh
          May 23, 2016 at 4:36 am
          This isn't saving it is fraud. So now we get it why the implementation was dela. More is the delay lesser are the arrears. Allowances are given because the basic ry is not enough. If you wont pay allowances, your dream of growth in spending will be just a dream. Moreover, be ready for some 'andolans' from the public after this lollipop is rolled out.
          Reply
          1. B
            Bahri
            Apr 23, 2016 at 7:49 am
            I wish the govt could bring in more discipline in itsPSUs, especially defence. A number of them pay overtime allowance without any additional output. I know that when I was in service ordnance factories used to pay nearly 50 % of the basic pay whereas the production in the 1st 6 months used to be less than the ry bill. The unproductive cost of these units used had to be debited to the defence budget. I even remember somebody fro Kolkatta being posted to a new unit in Dehradun, was ured in his posting order that his overtime allowance will be protected!
            Reply
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