Tarun Reflex

August 18, 2008

Sixth Central Pay Commission : Latest Updates

Pay panel award modification to cost additional Rs. 11,000 crore
Government will pay its 50 lakh strong workforce an additional Rs 11,000 crore over the pay hike of Rs 30,000 crore, including arrears recommended by the Sixth Pay Commission in March.
The modification of the Pay Commission award will cost the exchequer an additional Rs 5,000 crore towards annual wages and Rs 6,000 crore towards arrears, said Expenditure Secretary Sushma Nath.
The original recommendations of the Sixth Pay Commission would have entailed an additional expenditure of Rs 12,000 crore in annual wage bill and Rs 18,000 crore towards arrears.
However, prompted by the protest from several quarters, including representations from the defence forces, the government appointed a high-powered committee under the chairmanship of Cabinet Secretary K M Chandrasekhar to suggest improvement in the Pay Commission award.

Full Pension at 20 years of service

In a development that could well encourage more civil servants and armed forces personnel to opt for careers in the private sector, the government has decided to grant full pension benefits to all government employees who leave after 20 years in service, against the current 33 years.

The Union Cabinet has accepted this proposal, along with other recommendations of the Sixth Pay Commission on pension benefits for the estimated 3.84 million central government pensioners at a meeting here on Thursday. Experts said the reduction in the number of years of service to 20 years to earn full pension benefit was a liberal move and would end stagnation in government service.

Government officials told Business Standard that several other recommendations have also been accepted. These include raising the gratuity limit to Rs 10 lakh, higher pension for octogenarians, exclusion of earned leave encashed while in service from the overall limit, clubbing of earned leave and half-day pay leave for encashment.

Pensioners to get 40% raise, more gains for octogenarians.

Octogenarians will now be paid an additional 20 per cent of their basic pension, while those aged 85 will get 30 per cent more, rising to 100 per cent additional pension for centurions.

Officials said the final award for pensioners accepted by the government implied that central government pensioners would receive an overall increase of 40 per cent in pension. As a result the total estimated pension liability of nearly Rs 29,900 crore of the central government will go up by nearly Rs 1,400 crore annually.

Based on the Invest India Incomes and Savings Survey, 2007, it is estimated that 5.3 per cent central government employees (170,000) are likely to retire in the two years till 2009-10.

Another proposal to change the commutation formula and outsource the process to public sector banks, which would have saved the government Rs 2,344 crore annually, is also likely to have been accepted. If implemented, the government will bear only a notional subsidy on account of the interest payable to banks by employees who decide to commute a part of their pension, against the entire amount plus interest.

The central government had estimated 3,321,210 employees (excluding defence personnel) on its rolls in 2007, with the number projected to go up marginally to 3,329,682 in 2008.

What the Cabinet didn’t accept from Pay Panel
While the Government announced an average around 21 percent pay hike for central government employees to keep them in good humour as elections are near, it also rejected some proposals.
Sources said the Cabinet turned down the proposal of offering “liberal severance package” to government servants planning to quit the service after putting in 15 years and before completing 20 years without pension benefits.
The proposed move could have not only offered government servants some flexibility to proceed for better opportunities outside the public sector but also allowed the government to recruit fresh talent. However, even the Committee of Secretaries set up under the Cabinet Secretary rejected the proposal without citing any substantial reason.
Similarly, sources said the Government also declined to offer the women and disabled flexitime job engagement a long-pending demand with the Government. The issue was not even raised by any minister at the meeting that approved the pay hike.
However, one rejection by the Government should make the employees happy. The Cabinet declined to reduce the gazetted number of holidays to three Independence Day. Republic Day and Gandhi Jayanti and decided to continue with the existing number of gazetted holidays in a year.
However, the Government decided to process separately the issues like general insurance and health insurance.
Pay and Arrears
The following details are considered in addition to the report provided by the sixth pay commission:
  • Fitment based on multiplication factor of 1.86 instead of 1.74
  • Annual increment of 3% given in July
  • Lowest transport allowance of Rs. 600/- instead of Rs. 400/-
  • The following DA rates are considered*. – 0%- 1.1.06; 2%- 1.7.06; 6%- 1.1.07; 9%- 1.7.07; 12%- 1.1.08 and 16%- 1.7.08 onwards

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