Fresh Report says 50 Lakhs Central government employees may get higher wages from July, 18 months afteron
Over 50 Lakhs central government employees will likely start receiving
revised allowances, including for house rents (HRA), from July, 18
months after their pays were hiked as per the Seventh Pay Commission’s
(SPC) award. While the payout will help consumption — private
consumption growth had decelerated a bit in the final quarter of last
fiscal and analysts see an incipient pick-up in spending — as the
Reserve Bank of India observed in its second bimonthly monetary policy
statement for FY18 on Wednesday, it could pose an upside risk to
inflation. The RBI has projected retail inflation to be 2-3.5% in the
first half and 3.5-4.5% in the second half of the year. The delay in
disbursal of the revised allowances has saved the exchequer rs 2,200
crore a month or Rs 40,000 crore cumulatively since January 1, 2016, but
the government might partly compensate employees for this with a more
generous HRA than recommended by the panel, say sources.
HRA in cities with population above 5 million could be 27% of the basic
pay, against the commission’s proposal of 24%, the sources said. The
existing HRA in such cities is 30% of the old basic pay — since the SPC
hiked the basic pay by an overall 23.55% (weighted average), these
allowances will see a big increase in absolute terms. HRA accounts for
about 60% of the total allowances bill. The Cabinet would take up the
proposals related to allowances later this month, the sources confirmed.
The Ashok Lavasa-led committee on allowances, which was constituted by
the government to examine the CPC recommendations, had submitted its
report on April 27. The panel has suggested modifications in some
allowances applicable universally to all employees and also for those in
specific categories, including railways and defence. The report was
later placed before the empowered committee of secretaries headed by the
Cabinet secretary to firm up the proposals for approval by the Cabinet.
The SPC had suggested the abolition of 52 benefits and merger of 36 with
existing ones to end their separate identities. It had estimated the
financial implication of revised allowances would be around Rs 29,300
crore (including for the railways) in a year (Rs 2,442 crore a month).
In the 2017-18 Budget, the government has not explicitly provided for
additional costs to be incurred after implementation of the revised
allowances under CPC. The officials are confident that the additional
burden on the exchequer would be largely be met from savings from
allocations made to various departments for the year.
On June 29, 2016, the government accepted the pay- and pension-related
recommendations of CPC for over 10 million central government staffers
and pensioners, entailing additional cost of Rs 84,933 crore in 2016-17.
The Centre’s allowance expenditure is pegged at Rs 69,222 crore
(excluding defence) in FY18, 7% higher than the Rs 64,677 crore in FY17,
factoring in business-as-usual growth in expenditure. The pay panel had
given an overall 23.55% increase in pay, allowances and pensions,
including 16% pay rise, 63% surge in allowances and 23.6% increase in
pension.
Source : financialexpress
