Housing Facilities

While conceding the seriousness of the housing shortage in big cities..., I am not convinced that the suggested solution ... is the right one. The correct solution is either to increase the stock of houses in the big cities or to relieve the pressure by inducing out-migration. The latter option being closed, the former option is not going to be advanced by the suggested recommendation. The major outcome of the recommendation would be:

(a) some government employees would be induced to move into their own houses/flat and hence relieve the pressure on existing government accommodation in short supply;

(b) landlords would hike the rent in order to reap the additional rental incomes. Compared to the present position, for A-1 cities , HRA increase is 6.4 times for peon, 4.6 times for supervisor and as high as seven times for group A officers.

Both (a) and (b) would possibly and temporarily help the central government employees at the cost of those who are not fortunate to be in the central government service. This is not a desirable outcome.

In order to alleviate housing shortages, it is necessary to convert ... government-owned house into multi-storey flat and also substantially raise the current charges to the occupants of government houses which do not even cover maintenance charge...

Leave Travel Concession (LTC)

The report has recommended liberalisation of LTC in two dimensions. (a) encashment of earned leave upto 10 days along with LTC to the extent of a total of 60 days in a career span..., and (b) all senior exectives (joint secretaries and above) should be permitted to travel by air or AC first class at their option, on LTC and all other employees by rail by the entitled class on official tour. ... It is also mentioned that some 13 (out of some 200 odd) public sector undertakings, several nationalised public sector banks and five state government ... also permit air travel on LTC.

I do not support this move because of significant financial implications not only for the central government but also its spill-over effect on the state governments whose fiscal positions are known to be very precarious. Under the existing rules, outlay on LTC has increased from between Rs 30 crore to Rs 40 crore in the mid-eighties to the Rs 82.5 crore in 1993-94. ...

Income tax

The report states: Much though we would have liked to make the full emoluments of Government employees net of income tax, we have decided to start with allowances and pensions only as a first step (...emphasis in original). It, therefore, recommends that

(a) all allowances of central government employees, including those of Union Territories, may henceforth be paid net of taxes,...

(b) the tax concessions be extended to such part of DA as may be converted into Dearness Pay from time to time ..., and

(c) pensions of all retired central government employees may be paid net of taxes.

I do not support these recommendations because the provisions of the Income Tax Act must apply equally to all citizens whether they are government employees or not. At the time of approving the changes in direct taxes every year, the Parliament is expected to take account of legitimate exemptions and appropriateness of rates to reconcile the conflicting objectives of revenue generation and equity. Once this is done, no segment of the population should be given extra concessions in any form to get around the provisions.

I am even more concerned that the first step is towards the ultimate goal ...namely to make the full emoluments of government employees net of income tax which circumspection has prevented them from recommending. The argument given in support of this goal is ...it is a fact that it has not been possible for us to fully meet the aspirations of central government employees in respect of both salaries and allowance... I am sure my collagues are reasonable enough to recognise that salaries and allowances are to be determined mainly with reference to duties and responsibilities and only secondarily with reference to the aspirations relating to the life-style. Secondly, if an when rightsizing takes place, the argument would not apply. Finally, as the report recognises, even though legally possible it would not be equitable to treat central government employees as a special category for purposes of Income tax.... To be concluded

(Suresh Tendulkar is professor, Delhi School of Economics)