The Seventh Central Pay Commission has proposed a hefty 23.55 per cent hike in salary, allowances and pension for 4.8 million government employees and 5.5 million pensioners. If accepted, the recommendations of the commission, headed by retired judge A K Mathur, would be effective from January.
The recommended hike, contained in a 900-page report, is over 11 percentage points lower than the 35 per cent suggested by the sixth pay commission.
The panel also virtually expanded the one rank, one pay commission to all civilian central government servants, paramilitary forces and defence personnel.
The financial impact of the report, presented to Finance Minister Arun Jaitley on Thursday, would be Rs 1.02 lakh crore during 2016-17. The total salary and pension bill of the government would work out to be Rs 5.36 lakh crore in the financial year, 23.55 per cent more than the Rs 4.33 lakh crore that would have come if the commission's report was not there.
Of the total financial impact of Rs 1.02 lakh crore, Rs 73,650 crore will be borne by the General Budget and Rs 28,450 crore by the Railway Budget.
"In order to implement the pay commission recommendations, a secretariat will be set up under the expenditure secretary. The government will take a final decision, after examining the recommendations expeditiously," Jaitley said.
However, finance secretary Ratan Watal was hopeful that the government would not breach its fiscal deficit target at 3.5 per cent of GDP for 2016-17.
The basic salary hike recommended is 16 per cent, while that of housing rent allowance, other allowances and pensions are 138.71 per cent, 49.79 per cent and 23.63 per cent, respectively.
Pension of the retired staff would increase 23.69 per cent at Rs 1.76 lakh crore, against Rs 1.42 lakh crore.
Since the basic pay has been revised upwards, the commission recommended that house rent allowance (HRA) be paid at the rate of 24 per cent, 16 per cent and eight per cent of the new basic pay for Class X, Y and Z cities, respectively.
The commission also recommended that the rate of HRA be revised to 27 per cent, 18 per cent and nine per cent, respectively, when dearness allowance crosses 50 per cent, and further revised to 30 per cent, 20 per cent and 10 per cent when dearness allowance crosses 100 per cent.
After receiving a lot of flak for the new pension system, the panel suggested a number of steps to improve its functioning by establishing a strong grievance redressal mechanism.
The minimum pay recommended is Rs 18,000 per month and maximum at Rs 2.5 lakh for the Cabinet Secretary. The current salary of the Cabinet Secretary is capped at Rs 90,000 a month. It proposed a consolidated pay package of Rs 4.5 lakh and Rs 4 lakh per month for chairpersons and members, respectively, of select regulatory bodies.
A revised pension formulation for civil employees, including armed central armed police force personnel as well as for defence personnel, who have retired before January 2, 2016, has been recommended.
This formulation will bring about parity between past pensioners and current retirees for the same length of service in the pay scale at the time of retirement.
The pay commission has also proposed a status quo on the retirement age of central government employees at 60 years. The chairman and other member Rathin Roy recommended the age of superannuation for all central armed forces personnel to be raised to 60 years from 58 years, another member Vivek Rae did not agree with it.
Replacing the present system of pay bands and grade pay with a new pay matrix has also been mentioned in the seventh pay commission report.
Grade pay has been subsumed in the pay matrix. The status of the employee, hitherto determined by grade pay, will now be determined by the level in the pay matrix. However, the rate of annual increment is being retained at three percent. It also recommended a fitment factor of 2.57, which will be applied uniformly to all employees.
The commission also proposed that annual increments not be granted in the case of those employees who are not able to meet the benchmark either for modified assured career progression or for a regular promotion in the first 20 years of their service.
There was no unanimity of views in case of advantages given to Indian Administrative Service and Indian Foreign Service employees for promotion vis-a-vis Indian Police Force and Indian Forest Service employees.