Pay panel plans may cost exchequer Rs 18k cr

Written by fe Bureau | New Delhi, Feb 26 | Updated: Feb 27 2008, 04:59am hrs
The recommendations of the sixth pay commission is expected to cost the exchequer a minimum of Rs 18,000 crore, if the Rs 5,000 crore provision made by the railway Budget towards this end any indication.

The sixth Pay Commission is expected to submit its report by April 4, 2008.

The governments total employee strength is around 5.4 million and the railways employ 1.5 million.

The defence forces employs over 2 million personnel. This would mean that the additional burden for non defence personnel would be about Rs 6,600 crore. This apart, the additional cost to implement the recommendations for the about 2 million central government employees would be another Rs 6,600 crore.

Though comparable, this is slightly lower that the fifth Pay Commissions recommendation of around Rs 21,000 crore. The fifth pay commission submitted its report in 1996. Railways minister Lalu Prasad had made a provision of Rs 1,250 crore for the interim Pay Commission report last year, however the commission did not give any such award.

In a written reply in the Rajya Sabha today, minister of state for finance PK Bansal said, "The Pay Commission headed by Headed by Justice BN Srikrishna, is to finalise and submit its Report within 18 months of its constitution, that is by April 4, 2008."

The Pay Commission is an administrative system/mechanism that the Government of India set up in 1956 to determine the salaries of government employees. The First Pay Commission was established in 1956, and since then, every decade has seen the birth of a commission that decides the wages of government employees for a particular time frame.

Meanwhile, the Reserve Bank of India (RBI) has sounded a word of caution by suggesting that the state governments should not adopt the pay panel recommendations unmindful of their capacity to bear the additional burden.

The states need to base their decisions relating to salary levels after due consideration to their fiscal capacity, employee strength, size of population and the required complementary expenditure for productive employment, the RBI said in its recent analysis of the state government finances. The RBI's recommendation assumes significance as subsequent to the central pay panel award, the state governments would be under pressure to hike salary of their employees imposing additional burden on the exchequer.