7CPC Report – ‘In a Nutshell’

7th Pay Commission Report – ‘In a Nutshell’ – “This will impact 47 lakh employees and 52 lakh pensioners. The total monetary impact on the central government would be Rs 1.02 lakh crore.

 

In its report submitted to the Union Finance Minister Arun Jaitley on Thursday, the Seventh Central  Pay Commission has recommended an overall increase of 23.55 per cent in pay, allowances, and pension for government employees.

The award of the pay panel will also benefit staff of autonomous bodies, universities and public sector units, Jaitley said after receiving the report.

“This will impact 47 lakh employees and 52 lakh pensioners. The total monetary impact on the central government would be Rs 1.02 lakh crore. Around Rs 74,000 crore would be the impact on the Union Budget and Rs 28,000 crore on the Railway Budget,” Mr Jaitley said at his residence after he received the report from Justice A.K. Mathur, Chairperson of the Commission. Mr Jaitley said the impact of the recommendations amounts to 0.6 per cent of GDP, adding that while the government would review the report soon, the State governments would take their own view on it.

Justice Mathur said, “My only consideration was to make the service condition of all the service employees ameliorating so that they may perform their duty without worrying about their butter and bread.”

7th Pay Commission Report ‘In a Nutshell’

·         Based on the Aykroyd formula, the minimum pay in government is recommended to be set at Rs. 18,000 per month and Rs. 2,25,000 per month for Apex Scale and Rs. 2,50,000 per month for Cabinet Secretary and others presently at the same pay level.

·         In percentage terms, the overall increase in pay and allowance and pensions over the business-as-usual scenario will be 23.55 per cent”, Within this, the increase in pay will be 16 per cent, in allowances 63 per cent and in pension would be 24 per cent.

·         The impact the recommendations will be Rs 1.02 lakh crore — Rs 73,650 cr on Central Budget and Rs 28,450 cr on Railway Budget.

·         The report has abolished 52 allowances altogether and another 36 allowances have been subsumed either in an existing allowance or in newly proposed allowances.

·         Considering the issues raised regarding the Grade Pay structure and with a view to bring in greater transparency, the present system of pay bands and grade pay has been dispensed with and a new pay matrix has been designed. Grade Pay has been subsumed in the pay matrix. The status of the employee, hitherto determined by grade pay, will now be determined by the level in the pay matrix.

·         Pay Commission recommends 3% annual increment and 24% hike in pension for central government staffers.

·         FY17 impact seen at Rs 1.02 lakh crore from implementation of the 7th Pay Commission.

·         Without calling it one-rank-one-pension (OROP), the Pay Commission recommended a revised pension formulation for the central government employees, including para-military personnel as well as for defence staff who have retired before January 1, 2016.

·         The formulation will bring parity between past pensioners and current retirees for the same length of service in the pay scale at the time of retirement.

·         In case of retired government servants, it said, their pension should not be deducted from their consolidated pay. The consolidated pay package should be raised by 25 percent and Dearness Allowance by 50 percent.

·         The report says “Civil servants today need to be focused on outcomes, not processes, and have to be more accountable for delivery. They have to be agents of change and to this end need to be more agile, more technically savvy and to be able to ensure the economic and public service reforms that are essential.”

·         The Commission has also recommended introduction of the Performance Related Pay (PRP) for all categories of Central Government employees, based on quality Results Framework Documents, reformed Annual Performance Appraisal Reports and some other broad Guidelines. It suggested that the PRP should subsume the existing Bonus schemes.

·         The chairman of Seventh Pay Commission justice Ashok Mathur and member Rathin Roy suggest that in the present scenario, it is keenly felt that there needs to be a paradigm shift and the methodology that has been adopted in the past, namely of a seniority driven approach within the various services, has to be revisited. With the role of government in development and in making the country a market driven, investor friendly economy, key functionaries who should be evolving policy and driving the development process should be ones who have the requisite domain knowledge and sufficient experience in the departments and areas that they are required to head.

·         “In this context, that the service related claims for any top position are not relevant anymore, and what is important is that the right person is selected for every job. The analysis and the recommendations in the paragraphs that follow reflect this approach,” they say.

·         The approach suggested by this committee was that the skills and background of officers be carefully matched to the requirements of particular positions, while not confining individual officers to narrowly defined tasks or sectors. It was recommended that eleven domains (other than IAS) be identified and as part of the empanelment process at joint secretary and additional secretary levels each officer’s domain expertise be specifically identified.

·         It has suggested revision of rates of lump sum compensation for next of kin (NOK) in case of death arising in various circumstances relating to performance of duties, to be applied uniformly for the defence forces personnel and civilians including CAPF personnel.

·         In view of grievances relating to New Pension Scheme (NPS), it suggested steps to improve the functioning of scheme and establishment of a strong grievance redressal mechanism.

·         The Commission has recommended a consolidated monthly pay package of Rs 4.50 lakh and Rs 4 lakh for chairpersons and members respectively of the regulatory bodies.

·         The chairman and other member Dr Rathin Roy recommended the age of superannuation for all central armed forces personnel to be raised to 60 years from current 58 years, another member Vivek Rae did not agree with it. He endorsed the stand of home ministry.

·         Introduction of a health insurance scheme for employees and pensioners has been recommended. Meanwhile for the benefit of pensioners outside the CGHS areas, CGHS should empanel those hospitals which are already empanelled under CS(MA)/ECHS for catering to the medical requirement of these pensioners on a cashless basis.

·         All postal pensioners must be covered under CGHS. All postal dispensaries should be merged with CGHS.

·         Under the central government employees group insurance scheme, the rates of contribution as well as insurance coverage have now been enhanced. Monthly deduction has been raised from Rs 120 per month to Rs 5,000 and insurance cover from Rs 1.2 lakh to Rs 50 lakh for senior most level. At the bottom of the matrix, it has been raised from Rs 30 per month to Rs 1,500 and the cover hiked from Rs 30,000 to Rs 15 lakh.

·         The commission has recommended abolition of all non-interest bearing advances and increased the limit for interest-bearing advances for buying home from Rs 7.5 lakh to Rs 25 lakh.

·         House rent allowance – a key perk — has also been rationalized at 24%, 16% and 8% of the basic pay, depending on the city where the employee works, and would increase when the dearness allowance crosses 50% and 100%.

·         Under the Modified Assured Career Progression (MACP) the Commission has proposed that annual increments not be granted in the case of those employees who are not able to meet the benchmark either for MACP or for a regular promotion in the first 20 years of their service.

·         A fresh IAS recruit will get a basic salary of Rs 56,000 a month against Rs 23,000 currently, while a sepoy in the Indian Army will earn Rs 21,700 per month from Rs 8,460 currently. In addition, employees are paid dearness allowance and house rent among many other allowances.

·         There were some controversial issues that the Commission could not reach a consensus on. The most significant has to do with the perceived financial ‘edge’ granted to IAS and IFS officers at three promotion stages. Justice Mathur recommended that this be extended to the Indian Police Service and the Indian Forest Service as well.

·         Justice Mathur writes in his concluding note “that the main cause for resentment among services is that over a period of time IAS has arrogated to itself all power of governance and relegated all other services to secondary position. All posts covering majority of domains are today manned by IAS, be it a technical or administrative which is the main cause of grievance. It is time that government take a call that subject domain should be the criteria to man the posts and not a generalist. If fair and equitable treatment is not given to all Services, then the gap between IAS and other services will widen and it may lead to a chaotic situation and it will not be good for the governance and country.”

·         A member, Vivek Rae a former IAS officer, however, disagrees with chairman and economist Member. Rae argues for continuance of IAS officers unflinching superiority in the babudom.

·         Rae is of the view that “the observations made by the panel’s Chairman call for a paradigm shift from a cadre based Civil Service structure to a post based structure including induction of lateral entrants from outside government. While this issue can be debated (and has been debated), it falls well beyond the mandate of this Commission.”

D K Srivastava, chief economist at EY, said the impact of the pay commission’s recommendation on fiscal deficit due to increased outgo on the salaries of the government employees would not be much in the current fiscal as only three months were left.

“We will see an increase in disposable income of consumers that will push up demand and absorb the excess supply in the system. However, the net effect would be lower than direct effect as the government’s capital spend comes down as its current expenditure will expand because of higher salary outgo on government employees,” he said.

To hasten the implementation of the recommendation, the government has decided to set up an implementation secretariat that would be headed by the expenditure secretary. The ministry will also create a separate empowered committee under the cabinet secretary that will look at suggestions from stakeholders.