YES: Pay revision to hit Punjab, Kerala most

Punjab and Kerala will be the most vulnerable states in terms of impact on their finances if they go for pay and pension revisions for their employees following the Centre's decision to implement pay panel report, according to an analysis by YES Bank.

In its study, YES Bank said Kerala and Punjab stand out in terms of higher pension and wage liability and also have higher share of state government employees in the organised sector and as such look most vulnerable in terms of pay-scale revisions.

These states are also expected to record revenue deficit, suggesting greater difficulty in accommodating pay hikes.

Kerala follows its own pay commission and as such is already in the process of implementation of 10th pay commission retrospectively from July 2014.

WHAT THE LENDER REPORT SAID

• Kerala, Punjab stand out in terms of higher pension and wage liability
   
• They have higher share of state government employees in organised sector
   
• Hence, look most vulnerable in terms of pay scale revisions

The state of finances of Punjab look very precarious and it is one of the five states that have requested the Union government to go slow on implementation of the pay panel report. Besides, West Bengal, Tamil Nadu, Uttar Pradesh and Odisha in particular are known to have asked the Union government to go slow on implementation so that they get more time to equip themselves with resources to meet higher salary bills.

Spending by the Punjab government on salaries, wages and pension of its employees constitutes around 55 per cent of its revenue expenditure, while government employees account for 40 per cent of those in the organised sector.

Expenditure on salaries, wages and pension by Kerala is over 45 per cent of its revenue expenditure, while government employees are less than 40 per cent of workers in organised sector.

The study said Bihar, Odisha and Rajasthan are also vulnerable to pay-scale revisions as they have higher share of government employees and higher liability in terms of pension, wages and salaries.

According to the analysis, Gujarat and Jharkhand are most favorably placed in terms of smaller share of public sector employees and lower liability on pension, wages and salaries.

West Bengal and Maharashtra although have smaller size of public sector employees; their liability in terms of wages, salaries and pensions is high, the study said.

Chhattisgarh and Haryana, despite being relatively small states, have high share of public sector, making them more vulnerable than large states like Uttar Pradesh and Madhya Pradesh. Haryana has already budgeted for pay scale revision in FY17 and is expected to post a revenue deficit in FY17, it said.