Odisha to take Rs 5,000-crore hit from 7th pay commission

Finance secretary says a final call on the panel recommendations is yet to be taken but the state is equipped to meet the additional burden

The Odisha government might have to take an additional burden of Rs 5,000 crore a year on account of higher salary and pension to its staff, if the state decides to implement the recommendations of the Seventh Pay Commission. In its report submitted to the Union finance minister last week, the pay panel has recommended 16 per cent increase in salary (excluding allowances) and 24 per cent raise in pension for the Central government employees with effect from January 2016.

If the panel report is accepted in toto by the state, as was the case with the previous pay commission, Odisha will spend about Rs 3,000 crore more annually to pay higher salary to its 500,000 employees and Rs 2,000 crore to pay pension at the increased rate.

In its Budget for 2015-16, Odisha has estimated the annual salary outgo at Rs 18,201 crore, while that for pension is pegged at Rs 8,593.2 crore.

“The pay panel has just submitted its report. It has to be examined and approved by the Cabinet. Let us see if it is to being implemented as it is or there are changes. Then we will act on it and estimate what kind of additional financial burden will come on us if the salaries are adjusted in the state as per its recommendations,” Odisha’s finance secretary R Balakrishnan told Business Standard.

He added the state is well equipped to meet the challenge of providing for any additional expenditure “as and when the need arises”.

The confidence to meet the supplementary expenses stems from a couple of factors. Revenue (tax and non-tax) grew 25 per cent in the first six months of FY16, despite muted tax collection from the commodities sector, which is hit by a slide in prices of minerals (which contributes a substantial chunk to the state’s non-tax revenue basket) and petroleum products.

In FY15, revenue collection grew at a tepid 10 per cent due to the closure of many mines. However, the state has allowed the re-opening of most of the shut mines since start of the current financial year and collected a hefty Rs 1,200 crore towards stamp duty till date.

Besides, the fundamentals of state’s overall fiscal health appears comfortable with debt to gross state domestic product ratio standing at only 16 per cent against the fiscal responsibility and budget management norm of 29.5 per cent.

This gives the state room to go for more debt to meet its capital formation expenditure target while setting aside funds for additional non-Plan expenditure like payment of higher salary, say experts.

Moreover, the state is expected to garner substantial revenue from the ongoing coal auction and upcoming auction of major mineral mines in the field of iron ore, bauxite, chromite, limestone etc.

Hence, there might not be any financial problem in providing for extra expense towards the implementation of Seventh Pay Commission recommendations in the state, says former finance minister Panchanan Kanungo.