Implementation of 7th CPC recommendations on Allowances will be delayed

It is widely reported that the government may not implement all the recommendations of the Commission and that some payouts, such as house rent allowance, may pushed out beyond fiscal year 2017.

Reacting to news that the government may look to soften the financial impact of the recommendations of the 7th Pay Commission by pushing out some payments into future fiscal years, the panel’s chairman Justice Ashok Kumar Mathur said he wouldn’t be surprised with such a move and added that the practice existed even during implementation of previous pay commissions’ reports.

In an exclusive interview, Justice Mathur admitted that the cost of panel’s recommendations may exceed the forecast of about Rs 74,000 crore for the Union Budget and Rs 28,000 crore for the Railway Budget, and added that payments of allowance could result in higher payouts.

“But I am happy that the government may be intending to release salary and pension payments immediately [as per sources quoted by the CNBC-TV18 report],” he said, adding that he had had no communication with the government post submission of his report.

The Pay Commission, which issues recommendations for a payments hike for government employees once every 10 years, has in its 7th report sought a 16 percent hike pay, 138.71 percent hike in house rent allowance and a 26.63 percent hike in pension, resulting in an overall hike of 23.55 percent.

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Sources say the government is looking to absorb payment hikes to the tune of Rs 50,000-60,000 crore next fiscal, when the commission’s report will have to be implemented, out of the Rs 74,000 crore projected by the panel.

Below is the transcript of AK Mathur’s interview with Shereen Bhan on CNBC-TV18.

Question – Let me start by asking you for your first comment on what we are picking up from sources within the government at this point in time. What top government officials seem to be suggesting to us is that payment for allowances may perhaps be staggered and at this point in time, the Pay Commission recommendations and the payout will be confined to the salary and the pension component and also suggesting that some of the perks of the Seventh Pay Commission as recommended are notional and may not be accepted by the government. How would you respond to this information?

Answer – I have no idea what recommendation they are going to respond and what not they are going to respond, but I am very happy if that is the attitude of the government, that they will immediately release the salary and the pension part, because about 46 lakh people will be benefitted by the pay hike and similarly the greater pay hike will be to the pensioners.

That constitutes almost 52 lakh people. So, I am very happy that they have decided to release that immediately. And they can consider of releasing the allowances after sometime looking to their financial position.

However, we have tried to make it that the recommendation should be well within the kitty of the government. But still we do not know how much of the actual burden will be on the exchequer. Only our rough estimate is about Rs 1,02,000 crore. But perhaps, on the calculation of the allowances, it might exceed a bit also.

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Question – So, you are saying that on the basis of the allowance component, it may exceed the estimation and perhaps, the government then given the fiscal pressures at this point in time is well within its right to stagger the payment of the allowances. What has been the past precedent?

Answer – Past precedent has been government always delayed the payment of the allowances, payment of the recommendations in total. And the government do certain modifications, one way or the other and it depends upon the government that if their finances are well within the reach, then they can release forthwith or they can defer it for sometime also.

In the past also, the reports were always belated and sometimes, in the last Sixth Pay Commission, it took two years to implement them. But I am happy that they are going to implement the present Pay Commission’s recommendation which is given to them well within the time.

Government has sufficient time to react, they have to bring this Pay Commission’s recommendation with effect from January 1, 2016. We had given them a report in the early November. So, government has sufficient time to react on that.

Question – When you made that estimate of Rs 74,000 crore, that was the budgetary spend that you factored in as part of the Pay Commission, did you factor in the allowances as well?

Answer – We did of course, that is why we roughly estimate it to be Rs 1,02,000 crore. But actually, the allowance part is such a tricky thing that it depends upon your basic pay.

And sometimes, someone has some basic pay another fellow has some other basic pay. So, exactly, working out is very difficult. So, on an average, we have taken it that it should cost the government to the extent of Rs 1,02,000 crore but, it may exceed the calculation, go a bit deeper.

Source: Money Control