Pay Revision On Central Lines Hits State Plans

The Planning Commission is finding it difficult to finalise the state plans for 1998-99 in view of the additional financial burden on them because of the expected increase in the salaries of state employees on the lines of the raise given to Central government employees. "The additional burden may have serious effect on a lot of capital works including infrastructure projects of state governments. Most states have not been able to fulfil their targets for additional resource mobilisation last year. The situation is not likely to be much different this year," a plan panel source said.

The plan panel estimates that the additional burden on the states would be around Rs 20,000 crore in 1998-99 if the decision to raise salaries is taken by end of this year. A study by the National Council of Applied Economic Research, however, indicated that the burden could be in the range of Rs 20,000 crore to Rs 30,000 crore.

 

The council's study pointed out that the total expenditure of all states was Rs 2,31,161 crore in 1997-98, accounting for 16 per cent of the gross state domestic product of all states put together. This would mean that the additional burden on account of the salary increases would be around 10 per cent of the total expenditure.

The Planning Commission has so far finalised the plans of the Delhi and Tripura governments and is taking up the plan for Tamil Nadu shortly.

State governments have been demanding the Centre should compensate them for the additional financial burden. The Centre has neither accepted nor rejected the demand. The Planning Commission is unsure about how to finalise the state plans in the absence of any response from the Central government.

"Capital expenditure has been squeezed. In 1996-97 capital outlay of states for sectors like irrigation, roads, and transport is estimated to have increased by only 1.1 per cent as compared to an average growth rate of 11.8 per cent between 1990-97," the National Council of Applied Economic Research study said. The study said in 1997-98, expenditure of the states on non-development heads is estimated to have increased by 24.47 per cent as against 15 per cent in 1996-97. Expenditure on administrative services increased by 44.24 per cent in 1997-98 over the earlier year and reached 1.53 per cent of gross domestic product as compared to 1.19 per cent a year before.

"The gross fiscal deficit of the state governments has been about 3 per cent in 1990s. But this could increase substantially as a result of the implementation of the recommendations of the 5th pay commission for Central government employees," said the study. The Commission's recommendations were made only for the employees of the Union government, but in most states, staff salaries are linked to what is paid to the Central government employees. This is why states like Punjab, Haryana, Tamil Nadu, Rajasthan, Madhya Pradesh and Uttar Pradesh have announced the decision to revise wages of their staff.