Tarun Reflex

November 26, 2008

Cabinet approves pay revision for central public sector enterprises | Snowballing Effect

The Cabinet’s decision to give the go-ahead to a pay revision for the employees of central public sector enterprises (CPSE) was a given the moment the government accepted the Sixth Pay Commission recommendations for central government employees. Just as it is a given that state governments will soon have to follow through with hikes for their employees and then for employees of state public sector enterprises!
The gravy train will then move on to sundry departmental undertakings and autonomous institutions , colleges, schools and so on. Indeed, it is precisely because of the snowballing effect of any hike in government salaries that such decisions need to be taken with a great deal of circumspection – and must go hand-in-hand with higher productivity and greater accountability.
So while it is certainly not our case that officials of CPSE be paid way below their private sector counterparts (and be open to poaching by the private sector), we are emphatic that higher salaries cannot be divorced from performance. Unfortunately , that has seldom been the case in India. Whether it is state-owned airlines or telecom companies, there is little regard for customers. Competition has, doubtless, stirred them but their service standards still leave much to be desired.
It is, therefore, good that the government is, for the first time, introducing the concept of performance-related pay, something that is very much part of the salary structure in private sector companies. While ‘performance’ is often tough to measure, especially in CPSEs where profit is not the sole mandate, an appropriate measuring rod must be agreed upon if the exercise is not become a farce.
While the new pay scales are applicable to all 217 CPSEs, in practice officials of 151 profitable CPSEs alone will be benefited. This is because the higher wages and salaries are to be borne by the CPSEs and that automatically rules out loss-making enterprises. The intent is good.
On paper this should incentivise loss making CPSEs to improve their performance and their bottom lines. However, pricing decisions are often not left to CPSEs; rather they are dictated by government’s politico-economic concerns. So it is unfair to penalise the officials for no fault of their own. That’s a Catch-22 situation. But in an election year, we know which way it will be resolved!

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