Before polls, govt sets up Seventh Pay Commission

Written by ENS Economic Bureau | New Delhi | Updated: Sep 26 2013, 11:15am hrs
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Days before the Election Commission announces dates for assembly elections in five states including Delhi, the central government on Wednesday announced the setting up of the Seventh Pay Commission, which promises to lead to a sharp increase in the salaries of nearly 7 million central government employees and pensioners.

The report of the commission is, however, not expected until nearly two years after the Lok Sabha elections that are due before May 2014.

The Prime Minister has approved the constitution of the Seventh Central Pay Commission, said a statement by Finance Minister P Chidambaram.

The average time taken by a pay commission to submit its recommendations has been about two years. Accordingly, allowing about two years time (from now is necessary) for the Commission to submit its report by January 2016, the ministry said in the release.

The Sixth Pay Commission was set up in 2006, and gave its report after 18 months in March 2008.

The award of the sixth commission cost the government an additional Rs 26,035 crore in the first year, as per its own estimate. It was one of the main reasons why the Centre missed its fiscal deficit target for 2008-09. For most employees, salaries went up by 60-80 per cent. The World Bank had described the award of the earlier Fifth Pay Commission as the single largest adverse shock to Indian public finances.

The release said that the names of the chairperson and members, and the terms of reference of the seventh pay panel, would be decided soon.

Sources said the chairperson was likely to be a member of the judiciary in accordance with the practice of the last pay panel, which was headed by Justice B N Srikrishna. Finance Secretary R S Gujral, who is due to retire later this year, could be appointed member secretary, the sources said.

The Twelfth Finance Commission had advised the government not to set up a pay panel every 10 years, an advice the Thirteenth Finance Commission reversed. It said that the pay panel awards should be set up in time ensure their reports were implemented prospectively without having to pay out arrears, which dent government finances.

In FY 14, the Centre will pay its civilian employees Rs 1,24,657 crore in wages and allowances. Including the pension bill of Rs 70,726 crore, the total is about 12 per cent of total government expenditure for the year. State governments too adopt the pay commissions award for their employees. Several states are, however, yet to implement the award of the Sixth Pay Commission, saying they do not have the money.