Note Of Dissension Ii

S R Pandian, chairman, FCPC, and M K Kaw, member-secretary, reply

Our esteemed colleague Prof. Suresh Tendulkar has handed over his note of dissent at 7.30 pm today [January 29]. Normally, if the note had reached us well in time, we would have rebutted his arguments in the body of the Report...

Age of retirement: The argument that the increase in the age of superannuation would adversely affect the downsizing effort is not valid. Both the measures suggested by us are major policy initiatives with significant ramifications. They cannot be judged by looking at a single end-result. The measures suggested by us for downsizing include abolition of 3.5 lakh vacant jobs straightaway, which more than compensate for the lack of retirement in the first two years....

 

Housing facilities: About the increase in HRA, the report clearly spells out various methods by which the total stock of housing can be added to.....

LTC: The only objection to the liberalisation of LTC for senior executives is the financial implication. Our calculations show that this will cost only Rs 10 crores per year. This cannot be termed excessive.

Income Tax: With regard to income tax...our recommendation for paying allowances net of tax is already provided for in the existing law. Government is presently doing this for all IFS officers. ....

DA: We do not agree with our learned brother that we have arbitrarily fixed the minimum-maximum ratio at the same level as the Fourth CPC. This matter was discussed in depth... The decision not to touch the ratio is a considered decision of the Fifth CPC and there are solid reasons for it... The concept of vertical equity sought to be enunciated by our esteemed colleague is nothing but a rehash of certain modes of thinking which have in the past reduced our higher bureaucracy to the present sorry pass in terms of compensation packages. ...

Telephone Attendant Allowance: A large number of officers in the military, police, railways, district, administration and other Central/State Government Departments already have at least one attendant at their residences, whether he is called a batman or an orderly or a telephone attendant or a khalasi or whatever. The Telephone Attendant Allowance is meant to cover only those few senior officers, mainly posted in Secretariat jobs, who do not have such assistance at home. Such a facility will only result in making the life of such officers a little more tolerable and reverse the present trend of AIS officers not wanting to come to the Centre or to State Secretariat jobs.

Conclusion: We would not like to rebut all the points made by our esteemed colleague, nor is there time to do so...We would like to conclude that we were honoured in having the advice of a noted economist like Prof. Tendulkar and the Report is indeed a much better document because of his numerous contributions to it.

(S Ratnavel Pandian is a former Supreme Court judge. M K Kaw is additional secretary in the finance ministry)

The report recommends that inflation neutralisation be made uniform at a 100 per cent at all levels...

The same paragraph offers the defence of the recommendation in terms of the following arguments:

(i) Minimum-maximum ratios fixed by the Pay Commission should have some sanctity and stability and that it cannot be allowed to become a plaything in the hands of an erratic CPI;

(ii) Unbalanced external relativities with the lifting of the ceilings on private sector and the salaries in the public sector getting linked to productivity;

(iii) Unjust practice of difficult neutralisation as the government is unable to pay comparable salaries at higher levels to its officers in spite of the enormity of their tasks and higher levels of responsibilities.

These grounds are taken to override the argument of vertical equity' accepted by the earlier Pay Commission... in justifying the differential rates of neutralisation.

I am not persuaded by the defence for the following reasons:

(i) First, the original justification for DA was the premise that inflation affects everybody equally and some minimum subsistence level should be guaranteed to everybody independently of prices. This yielded the industrial DA system by which the employees were compensated with equal absolute amount of per point increase in the Consumer Price Index. Consequently, the percentage of DA to salary declined with a rise in salary levels in the hierarchy. This point basis was linked with percentage neutralisation according to basic salary level in the Fourth Central Pay Commission (CPC). This was deviation from the original premise. It can possibly be rationalised by arguing that the minimum subsistence levels differ at different levels in the hierarchy and it is these levels at their minimum in each grade should be protected against the price rise. This provides the justification of vertical equity in terms of declining percentage of neutralisation. Acceptance of maximum-minimum ratio in combination with the

recommendation of declining percentage neutralisation by the Fourth CPC shows that the former was to be subject to the vertical equity considerations and was not expected to remain stable in a rigid fashion.

(ii) Second, the maximum-minimum ratio itself has no objective sanctity. The present FCPC has arbitrarily fixed it at the same level as the Fourth CPC. It would also be useful to remember that the ratio compares basic salaries only and does not take account of non-monetised perquisites. Inclusive of these perquisites, the ratio would be higher.

(iii) Third, the unbalanced external relativity observed in the last five to six years cannot be assumed to remain stable as the pay-packets in the private corporate and public sector enterprises are bound to be linked to their commercial fortunes and performance. This is not the case in central government service.

(iv) Fourth, the argument of unjust practice of differential neutralisation is linked to the inability of government to pay comparable salaries at higher levels in spite of enormity of tasks and higher levels of responsibilities. This has to be taken in conjunction with the creation of unnecessary posts...

Promotion policy

The current empanelment procedures for additional secretary/special secretary/secretary need to be made open and transparent. The special committee currently assisting the cabinet secretary should include at least one non-IAS outsider who can take a detached view neutral to different services...

The current procedure especially in IAS does not permit inter-batch comparison for empanelment. With the increase in the numbers over the years there is much weaker reason to believe that everyone in an earlier batch would be uniformly superior to everyone in a subsequent batch. Some more stringent screening procedures need to be devised by which eligible numbers from each batch can be reduced and at least two consecutive batches can be considered for empanelment. ... While it would cause some heart burning..., it would generate incentives for the efficient younger officers to... aspire for fast-track promotion.

Currently, all the Secretaries get identical pay. This was possibly sensible when the number of secretary level posts were strictly rationed. The number of secretaries to the government of India increased from 45 in 1972 to 61 in 1984 and 107 in 1996.... The justification for having identical salary for such a large number is very weak indeed. There is, therefore, a good justification for creating a scale for secretaries.... it could start at a lower level than suggested in the new scale and go almost upto the level of the cabinet secretary. The range should be such as to accommodate the differences in the workload, duties and responsibilities after taking account of the 30 per cent reduction recommendedin the report.

In addition, fixed time contracts can be offered for the top positions not only to outsiders but also those from the subsequent batches who are willing to switch to contract basis in return for fast track promotions. In such cases, clear-cut performance criteria needs to be evolved....

Financial implications

The gross additional implications of the recommendations pertaining to all central government employees have been estimated to be Rs 8,800 crore.... After netting out the impact of the suggested deferment of retirement benefit amounting to Rs 1500 crore the net impact is estimated to be Rs 7,300 crore....If my arguments for not increasing the age of retirement are accepted, the total expenditure ... would rise to Rs 10,300 crores.

Although the staff of the FCPC has done the best possible job in estimating financial implications,... the data-base on pensionary benefits to past pensioners is extremely weak. We do not have the size distribution of the total stock of past pensioners according to the size of pension they draw. Even Rs 1,500 crores for the retirees during 1997-98 is only a notional figure...

Some of the suggestions in this note may merely offset the addition of Rs 1,500 crores on retirement. In order to keep the outlays under strict check, it is necessary to provide for a reasonable cap on specific allowances at the departmental level to be strictly adhered....

Two final points

My colleagues have rightly suggested a drastic reduction in the number of holidays for central government employees. They have suggested three national holidays: 15 August, January 26 and October 2. I hold the Mahatma in the highest esteem. However, given the proclivities of the government to extend the list of person-specific holidays..., I would like to take out October 2 from the list.... In fact, working harder on October 2nd would make the Mahatma much happier in his heavenly abode.....

In the policy statement of allowances, there is a reference bordering on the tinge of envy, to a number of officers having orderlies and batmen. This has been translated into the recommendation that all executives of and above the rank of deputy secretary and equivalent may be provided with a residential telephone attendant whose tenure would be conterminus with that of the officer, who would not have the status of a government employee and who are to be recruited directly at a fixed rate of Rs 1,500 per month being borne by the government.... This is an unfortunate suggestion for the central government to subsidise full-term domestic servants for officers who are currently not entitled to orderlies and batman. Propriety impels me to refrain from any further comment. I simply cannot support it. Stronger case exists for a phased withdrawal of this facility wherever it is currently exploited officially or otherwise.

(Tomorrow: Interview with SureshTendulkar.)