In a move that is beneficial and slightly destructive, the Indian government has approved the implementation of the 7th Pay Commission, which came with an overall hike of 23.5 per cent. The changes will be implemented from 1st January 2016, and will cost the government over £10.2 billion annually.
"I'm quite confident that after implementation of the 7th Pay Commission awards, government salaries are distinctively higher than market salaries and private sector salaries," Finance Minister Arun Jaitley said at a briefing. Entry-level pay has been raised to Rs 18,000 per month from the existing Rs 7,000, and maximum pay, drawn by Cabinet Secretary, has been fixed at Rs 250,000 per month from the current Rs 90,000. Jaitley said budget provisions will take care of the hike in salaries suggested by the panel. The government will also examine whether extra resources are needed to be raised from the market, to meet these suggestions.
A new Pay Matrix has been approved on the recommendation of the commission. Gratuity ceiling for employees has been doubled to Rs 2000,000, while housing loan allowance has been hiked from Rs 750,000 to Rs 2500,000. The government has retained four interest-free advances, including for medical treatment, tour/transfer, for family of deceased employees and leave travel concession, also abolishing all other interest-free advances. It said, "The commission examined a total of 196 existing allowances and, by way of rationalisation, recommended abolition of 51 allowances and subsuming of 37 allowances."
The existing allowances of employees will continue till a government panel takes a call on scrapping many of the allowance as suggested by the panel. A decision has also been taken on whether arrears pay and pension benefits will be paid during the current financial year, unlike in the past when parts of arrears were paid in the next financial year.
The recommendations will be of benefit to over 4700,000 central governmental employees and 5300,000 pensioners, out of which, 1400,000 employees and 1800,000 pensioners are from the defence forces, the government said. Regarding administrative reforms suggested by the panel, Finance Secretary Ashok Lavasa said all such issues, on which suggestions or advice have been given by the commission, are being looked into by the administrative ministries.
"In the past, employees had to wait for 19 months for implementation of the commission's recommendations at the time of 5th CPC, and for 32 months at the time of implementation of 6th CPC. However, this time, 7th CPC recommendations are being implemented within 6 months for the due date." Hospital leave, special disability leave and sick leave have been subsumed into a composite new leave named ‘Work Related Illness and Injury Leave’ (WRIIL). Full pay and allowances will be granted to all employees during the entire period of hospitalisation on account of WRIIL.
While the government did not explicitly specify an amount for Pay Commission provisioning in the Union Budget for 2016-17, it had said that an interim allocation for various ministries was made in the budget. Asked on the likely impact of salary hikes on inflation, Jaitley said some impact on inflation will be natural as more resources are being made available in the hands of the government employees.
