The Fifth Pay Commission did not find Kerala an eager taker of its proposal for enormous salary hikes. The Sixth Pay Commission, too, has little chance of stirring the Left Democratic Front government?s appetite for populism, especially at a time when the state has been thrown in the rogue league of nine states battling their huge revenue deficits.
??It is not in my immediate agenda to implement a wage hike for employees following the Centre?s example,?? says TM Thomas Isaac, the state?s finance minister.
In fact, Isaac is sweating it out on two different tracks of accounting drills. First, buoying the state?s economy by doubling the capital expenditure component of government spending. Second, on the public finance track, ironing its Rs 3,367-crore revenue deficit to zero by 2010 to present cleaner books to the 13th Finance Commission.
Predictably, staff unions have become restless after details of 6th Pay Commission reports came out. The government, however, insists there is not enough fiscal space for a wage hike now.
??Let?s see how the state?s devolution turns out in the next finance commission report before deciding on the hike,?? Isaac told FE. The 6th Pay Commission report makes a provision that the states ??can consider deciding on a date of implementation different from that of Centre, staggering the payment of arrears suitably.??
For Kerala, much would depend on what Vijay Kelkar, chairman-designate, 13th Finance Commission, has in mind to fine-tune the Centre-state devolution formula this time. Some experts agree with Isaac that Kerala?s got a raw deal at the 12th Finance Commission?s fund window that made it squeeze its development expenditure.
As per the 12th Finance Commission?s formula, the state was forced to pay a big price for its social sector success. For instance, the 12th finance panel had pegged 40% weightage to population. Just by its extra initiatives in population control, Kerala got Rs 6,088 crore less than what it was entitled by the 10th Finance Commission award. The 12th finance panel would have transferred Rs 16,059 crore more to the state has it been an average or belowperformer in primary education and health. By being the country?s topper in human development indices, Kerala lost out on these two counts.
At the same time, Dr Kelkar may choose what the finance minister P Chidambaram recommended in his Budget speech for 2008-09, that the 13th Finance Commission should revisit the fiscal re-adjustment roadmap. In that case, Kerala may be able to show an improved? though not the best?progress card.
From 39.1% in 2005, the state?s debt to gross state domestic product ratio has fallen to 37.6% in 2007. Tax revenues in 2007-2008 are up by 22.1%. In the current fiscal, the state is targeting 17% growth in tax revenue, reining in revenue expenditure by 8-9%.
Meanwhile, the government is living off a Rs 57,138-crore debt-mountain, only slightly better than Maharashtra, Gujarat or West Bengal. Staff salaries, pensions and interest payments eat into 77% of its revenue income. To find money for paying out a huge wage hike, the state finance minister may have no option but await the Thirteenth Finance Commission award.
The question is: for how long are the 5.6 lakh state employees willing to wait?