The Orissa government, which has managed to wriggle out of a chronic financial crisis, seems quite concerned over the possible fiscal impact of the Sixth Pay Commission recommendations. ??The financial burden would be around Rs 5,000 crore?? says state finance minister, Prafulla Chandra Ghadei. Unless the Centre comes to our rescue, finances will go for a spin, he adds.
Ghadei?s apprehensions stem from the fact that state finances dipped into the red soon after the Fifth Pay Commission recommendations were introduced in 1996-97. The states? revenue deficit further widened leaving little space for capital expenditure.
The 5th pay panel recommendations were revised in 1997-98. Because of the recommendations, Orissa?s salary and pension bill soared to Rs 3,874.36 crore in 1998-99 from Rs 2,940 crore in 1997-98. The bill was a meagre Rs 150.78 crore in 1980-81, only 27.59% of the total expenditure. Later, it rose to Rs 2,291.46 crore, about 41.40% of the state’s total expenditure in 1997-98.??The 5th Pay Commission, in fact, dislocated the state?s finances??, said Gadhei. Suddenly, state liabilities rose by Rs 770 crore per annum, he added.
Stringent fiscal measures, like compression of expenditure and broadening of revenue collections, helped the state bring its fiscal position back into the black. It posted a net revenue surplus of Rs 481.19 crore in 2005-06 after reeling under revenue deficit for 22 years.
This position was consolidated with a higher revenue surplus next year. In 2007-08, the revenue surplus is likely at Rs 823.18 crore. Looking at the buoyant fiscal conditions, Orissa has pegged its 2008-09 annual Plan at Rs 7,500 crore, and aims to achieve 9% growth rate during the 11th Plan period.
However, the fiscal impact of the Sixth Pay Commission is sure to derail state finances again. Though the recommendations are not binding on state governments, it remains to be seen whether Orissa will be able to withstand pressure from employee unions. The strength of state government employees has swelled to 4.81 lakh from 4.11 lakh in 1992. In the penultimate year to the Assembly elections, no state government would like to displease this influential and organised vote bank.
Perhaps, that is the reason why Gadhei announced the setting up of a fitment committee to look into the 6th Pay Commission recommendations even before a demand was put up by the employees. After all, coming back to power is more important than state finances.