On June 29, the Cabinet approved implementation of the pay panel, which has recommended an overall salary hike of 23.5 per cent.

One crore government employees and pensioners will get a 2.5 times hike in basic pay and pensions under the recommendations that will cost the exchequer Rs 1.02 lakh crore annually, which the government said will have a multiplier effect on the economy.

The rating agency said after the sharing of central taxes with the states, the Centre’s net tax revenue will rise by Rs 14,100 crore, or 0.09 per cent of GDP, in FY17.

While the employees will get salary arrears from January 1, 2016, allowances will be paid only from today (July 1).

“Thus, the gross impact of 7th Pay Commission is likely to be Rs 94,775 crore. The Central Government will receive income tax on this pay out and collect excise duty on consumption after sharing the increase in income tax and excise duty with States. Thus, the net impact on the Central Government finances is estimated to be Rs 80,641 crore,” it said.

Ind-Ra believes the impact of pay revision of State Government employees will be felt only in FY18.

“The Pay Commission award is expected to be less severe on state finances than expected earlier due to a lower arrear pay out. In all likelihood, the impact of a salary revision of the Seventh Central Pay Commission on State Government finances will be Rs 1.58 lakh crore in FY18,” it said.

The agency does not see any immediate threat to inflation due to the award.

“Though consumer price inflation may inch up somewhat due to higher prices of services, impact on wholesale price index is likely to be muted due to the counter balance provided by the deflation in commodity prices and the availability of excess capacity in several manufacturing sectors,” it said.

PTI

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With absence of an explicit overall provision for the Seventh Pay Commission in Budget raising questions, government today said the once-in-a-decade pay hike has been built in as interim allocation for different ministries and Budget numbers were credible.

The voluminous Budget documents state that “the implementation of the Seventh Pay Commission due from January 1, 2016 is to be implemented during the financial year 2016-17 as also the revised One Rank One Pension scheme for Defence services.”

“The government has made provisions for the additional liabilities on these count,” it said, without giving the amount allocated for implementation.

Economic Affairs Secretary Shaktikanta Das said the number cannot be quantified and it has been built up in budget of various ministries.

“We cannot really quantify how much we require in 2016-17. Because the Secretaries Committee have to first give its recommendations, then government will take a decision and then only we will know what is the requirement in FY17,” he said here.

Implementation of the pay commission report is to cost the government Rs 1.02 lakh crore.

“We have the Pay Commission recommendations with us, we have analysed the likely requirement and it has been built into the Budget of various ministries. Some suitable interim provisions have been made,” he said without elaborating. “Hence the expenditure and revenue numbers are credible.”

Das said Finance Minister Arun Jaitley in his Budget speech stated that interim provisions have been made. “And these provisions are there in the Demands for Grants for individual departments and ministries. It is built into and subsumed into those allocations.”

“The Budget reaffirmed the commitment of the government to continue with the process of fiscal consolidation as projected in the Medium Term Fiscal Policy Statement of 2015-16 despite a tough external environment,” the Budget documents said.

Accordingly, fiscal deficit has been projected at 3.5 per cent of GDP in 2016-17. “In accordance with the amended FRBM targets, the fiscal deficit of 3 per cent is projected to be achieved in 2017-18 onwards.”

“Keeping in view the challenge of reduction of fiscal deficit by 0.4 per cent of GDP in a difficult year in 2016-17 with substantial additional liabilities on pay revision etc, the government is quite optimistic of fully achieving the fiscal deficit target of 3 per cent or below by March 2018,” the documents said.

Inputs with PTI

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The government will announce the 7th Pay Commission award in the this budget to facilitate central government employees salaries with regard to inflation, Finance Ministry official said Friday.

Addressing the Consultative Committee attached to the Finance Ministry, Finance Minister Arun Jaitley said Friday, “During the financial year 2016-17, the central government has to make provision for about Rs 1.10 lakh crore in order to meet the liabilities on account of implementation of 7th Pay Commission recommendations and One Rank One Pension (OROP) Scheme,”

He made clear that there would be no doubt for implementation of 7th Pay Commission award and One Rank One Pension (OROP) soon after Budget.

The Finance Ministry officials said the central government knows that the employees are not happy with the pay commission recommendations.

Since adjusting salary, allowance and other financial benefits to market price is a complex issue, hence the government has set up an Empowered Committee of Secretaries, headed by Cabinet Secretary P K Sinha, to process the pay panel’s recommendations on pay hikes for central government employees, the officials said.

An Implementation Cell has been created in the Finance Ministry which works as the Secretariat of the Empowered Committee.

The first meeting of Nodal officers of different ministries was held on February 2 in the Secretariat of the Empowered Committee for discussing the relevant issues in connection with the processing of the recommendations of Pay Commission.

According to the minutes of the of first meeting, the employees’ associations through ministries can raise afresh the demand for pay hike which were rejected by the 7th Pay Commission but it will be done in short time as the government intend to implement pay commission award after the budget.

The 900-page report of the 7th Pay Commission headed by Justice A K Mathur was presented to Finance Minister Arun Jaitley on November 19 with a recommendation for raising minimum pay to Rs 18,000 per month from current Rs 7,000 while the maximum pay, drawn by the Cabinet Secretary, has been fixed at Rs 2.5 lakh per month from current Rs 90,000. For the Secretaries it has been fixed at Rs 2.25 lakh as against Rs 80,000 currently.

The pay commission award is from Januray 1. 2016 but it is likley to be implemented from mid-this year and employees paid arrears.

The panel recommended a 14.27 per cent increase in basic pay, the lowest in 70 years. The overall increase in salary, allowances and pensions is 23.55%. The increase in allowances will be higher by 63% while pensions will rise 24%.

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The government is likely to defer of the 7th Pay Commission award in a bid to improve financial resource crunch estimated for 2016-17.

The Union Cabinet approved last week the formation of an empowered committee of secretaries to work out ways for staggering the award through more than one financial year, instead of letting the Rs 1,02,100-crore bill from the implementation of the award come up at one go.

A source in Finance Ministry said one of the options for the empowered committee was to defer the increase in allowances for central government employees, while letting the rise in pay for all scales to go through.

According to finance ministry figures, the ratio of allowances to pay for these 4.7 million employees is 1:1.4. For instance, the Budget estimates in 2015-16 pegged the salary bill for all central government employees at Rs 60,731 crore, whereas the tab for allowances is Rs 84,437.4 crore.

The announcement of a deferral is expected to be part of Finance Minister Arun Jaitley’s Budget speech on February 29. The formation of an empowered committee for the pay panel recommendations, again a first for the central government, is meant to bring all stakeholders on board in the exercise.

The official explained ministry-wise consultations with the department of expenditure in the finance ministry, in the run up to the Budget, were mostly over. Those discussions had proceeded on the assumptions that the Pay Commission recommendations would be implemented. It was now necessary to bring the secretaries of key departments on board about the need for a drastic cut-back on those estimates.

The status quo on allowances would also allow the government to ignore the demand made by various staff associations to raise the minimum level of salary for employees. The Pay Commission has suggested that the minimum should be Rs 18,000 per month; the unions have demanded that it should be raised to a band of Rs 19,000 to Rs 21,000 a month. Such a change would have created a ripple effect.

About 70 per cent of the government employees are bunched in the non-executive ranks; the starting salary for them tops about Rs 42,000 a month, show calculations by the Commission. Even a modest increase in pay for them would cascade the bill for the government by another Rs 50,000 crore annually. The award of the Commission is slated to take effect from January 1 this year.

A key element in the plan to defer some elements of the Seventh Pay Commission recommendations will be the railway ministry. Government managers reckon the powerful unions of the Indian Railways need to be brought on board for this plan to be successful.

The higher wage bill for the Suresh Prabhu-led ministry works out to Rs 28,450 crore a year, only a shade less than the yearly loss it makes on its passenger services at present. No formal communications have been sent out to the railway unions by the committee.

“It will follow once the empowered committee has decided to take a call on which allowances to clip,” said the source.

In a recent television interview with NDTV, Minister of State for Finance Jayant Sinha had said the Pay Commission recommendations were the biggest headache for his ministry, struggling to keep the aggregate expenditure of the Union government under control.

Via  Business Standard

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