Windfall to Central staff, pensioners from Jan 1, 2016
New Delhi : The Union Cabinet on Wednesday gave a windfall of 23.55% hike in salaries and pensions to nearly one crore central government employees and pensioners as recommended by the 7th Central Pay Commission in November with retrospective effect from January 1, 2016 and payment of the arrears totalling over Rs 12,000 crore this year itself.
The increase of both salaries and pensions is 2.57 times more over the 6th Pay Commission. Not accepting the Pay Commission’s recommendation to reduce as many as 196 kinds of allowances the government employees get, the Cabinet constituted a committee headed by the finance secretary for further rationalisation of allowances and asked for its report within four months. Until then, the current allowances will continue, Finance Minister Arun Jaitley told a Press conference here.
The Cabinet also rejected the Pay Commission’s recommendation for deduction of Rs 1500 to Rs 5,000 per month for the group insurance and asked the finance secretary to explore a low cost insurance for the employees.
Even while Jaitley congratulated the government officers, employees and pensions on what he described as a ‘historic rise’ in their salaries, the Confederation of Central Government Employees dubbed the announcement as ‘not acceptable’ in view of the prevailing economic conditions.
Jaitley rejected protests, pointing out that the government employees would be getting more than double the salaries in the private sector. Quoting an IIM Ahmedabad study carried out at the behest of the pay commission to compare the salaries with the private sector, he said the lowest helper in the government will get Rs 22,579 per month as against Rs 8,000-9,500 per month in private sector.
The monthly basic salary of the lowest class IV employee will go up from Rs 7,020 to Rs 18,000 while the Class I officer’s starting salary will be Rs 56,120.
“The minimum pay of Rs 18,000 per month is reasonable to ensure decent standard of living,” Jaitley said. The Cabinet also improved recommended salaries in defence to give a hike of 2.67 times as against 2.57 times to the civilians to
ensure parity with the para-military forces. Those in the Armed Forces get the highest as their salary hike is from Rs 21,000 to Rs 31,500. The annual recurring cost of the hike on the taxpayer will be Rs 72,800 crore and Rs 84,933 crore in the current year because of the arrears of Rs 12,134 crore to be paid for implementation from January 1. Though Jaitley insisted on paying the arrears in the current year, the Finance Ministry sources said the arrears will be paid with September salary to boost the employees’ consumption during the festival season.
Jaitley said the Cabinet also accepted the Pay Commission’s recommendation for 3% annual increment and enforcing it on two dates on January 1 and July 1 instead of just once. A group will be set up for hearing on the anomalies that may arise in implementation while another group will be streamlining the national pension scheme.
The interest-free advances for cars and two-wheelers have been abolished but the advances for housing raised from Rs 7.5 lakh to Rs 25 lakh. Employees will also get interest-free advance for computers as also for medical treatment and other exigencies.
Jaitley pointed out that the previous governments took 19 months to decide on the 5th Pay Commission’s recommendations and 32 months in case of the 6th pay commission, while the present government finalised the decisions on the 7th Pay Commission in seven months. The government had received the Commission’s report on November 19, after which a secretaries’ committee headed by the cabinet secretary was constituted to process the recommendations.
As against the increased annual burden of Rs 17,000 crore on the exchequer from the 5th Pay Commission, and Rs 40,000 crore from the 6th Pay Commission, implementation of the 7th Pay Commission will cost Rs 72,800 crore, and this may change because the decision on allowances has been deferred for the secretary-level committee to reconsider the Pay Commission’s recommendations, Jaitley added.
Commenting on the cabinet decision, Congress spokesman Randeep Surjewala said that the central government employees feel let down and short changed by the lopsided and inadequate hike in salaries and allowances.” The hike in salaries and allowances is mere 15% on basic pay and not 23.5% as is being wrongly claimed by the government,” he said.