New Delhi: Some four million Union government employees could get up to 50% increase in their annual compensation after the Sixth Central Pay Commission weighed in with much-awaited recommendations that also included significant changes aimed at boosting productivity in the notoriously inefficient Indian bureaucratic corps.
The proposed pay increase, including arrears, will cost the Union government Rs30,621 crore in 2008-09. A part of the pay increase will be effective from 1 January 2006, the commission’s report said.
The rationale for the commission’s recommendations was based on India’s strong economic growth and a resulting increase in tax collections.
The four-person commission, headed by justice B.N. Srikrishna, submitted its report to the government on Monday. The recommendations have to be cleared by the Union cabinet, which, in what is likely to be a run-up to general elections, is likely to approve at least the compensation part of the proposals.
Indeed, the commission made a strong plea to the government to view its recommendations as an integrated package and not as unrelated suggestions. In 1997, the government had ignored recommendations of the Fifth Pay Commission to introduce incentive-linked salaries, while accepting other populist suggestions.
Central pay commissions have been generally set up at intervals of 10-13 years, to examine issues such as pay, service conditions and promotion policies. The latest recommendations propose an across-the-board increase of between 35% and 50%, and a reduction in the total number of grades to 20 from the earlier level of 35, which will benefit lower-rung employees more. The minimum salary at entry level should be Rs6,660 and the maximum, for the cabinet secretary, should be Rs90,000, the commission said.
The suggestions to raise salaries have been supplemented by a call to introduce a performance-related incentive scheme and open the door to lateral entry of private sector employees into the upper tier of government to increase the efficiency of the system. Lateral entry is to be encouraged through market-based salaries.
Similarly, the top tier of regulators overseeing economic and pricing functions, such as capital markets regulator Securities and Exchange Board of India, should look to attract a larger talent pool through market-based pay, the recommendations said.
The potential impact of such a proposal, however, was received with some scepticism.
“Even while the commission has talked of market-driven salaries for government employees, maybe at entry level government salaries can match that of private sector,” said Anil Sachdev, chairman of Right Grow Talent, a human resources firm. “But, at senior levels, the difference is obscene. If the chairman of a regulator is going to be paid Rs3 lakh a month, this is nothing compared to that earned by a senior-level private sector executive.”
Sachdev, however, agrees the government has opened a window to attract private talent. “What’s heartening is that a regime of meritocracy will set in and structures and productivity will be linked if the pay commission’s recommendations are implemented.”
The commission has also recommended an end to the practice of Union government absorbing open-ended liabilities in the form of pensions and health care benefits. Employees who joined Union government service after 31 December 2003 have already moved to a funded pension system. The panel has recommended new government employees and new pensioners be compulsorily covered by a medical insurance scheme and not the Central government health scheme.
“It is a very useful step,” said Gautam Bhardwaj, head of Invest India Economic Foundation, who has served as consultant to the finance ministry on pension issues. Other than capping its open-ended commitments, an insurance premium clearly budgeted will enhance the transparency of the system, said Bhardwaj.
The panel has also recommended the pension system be altered to facilitate early voluntary exits among government staff. The aim behind the recommendation is to push towards a more youthful and enthusiastic bureaucracy. To bring about greater equity in job openings, the panel has also recommended that all services should be eligible to apply for top postings in government, which have largely been restricted to IAS officers.
Other suggestions that make the government service more attractive include flexible working hours and special packages for women including maternity benefits. Extra benefits to government employees have been matched with suggestions to make the system more citizen-friendly. One such measure suggested is to reduce the number of holidays to three, from the current 17.