Centre sets up pay panel year ahead

With elections just months away, the Centre on Wednesday announced constitution of the Seventh Pay Commission a year in advance. The commission will revise salaries, allowances and pensions of about 80 lakh Central government employees and pensioners.

“Prime Minister Manmohan Singh has approved the constitution of the Seventh Pay Commission. Its recommendations are likely to be implemented with effect from January 1, 2016,” Finance Minister P Chidambaram said in a statement.

The pay commission is constituted every nine years. The Sixth Pay Commission was set up in 2006. Accordingly, the next one was scheduled for 2014.

While the Congress and employees’ unions hailed the decision, a Planning Commission member was quoted as saying that the move was “an election force.”

“This is a big election force. It is an interesting situation since it is election time. You need to get elected, otherwise you cannot do what you want to do,” Planning Commission member Arun Maira said in Kolkata.

A trade union representing central government employees demanded that the award be implemented with retrospective effect from January 1, 2011.

Commerce and Industry Minister Anand Sharma said: “It is the right of the employees to have a pay commission. When recommendations come, the government will be able to implement them. You do not do something for which you do not have the money.”

But economists and industry bodies were apprehensive about the timing of the announcement. It comes amid a sluggish economic growth. They were of the opinion that instead of giving stimulus to consumption expenditure, the government should have focused on enhancing supply management.

“The government, at this juncture, should also focus on reforms in improving supply side economics and supply chain management because increase in income levels without adequate infrastructure and supply scenario could lead to higher inflation. So, going ahead, reforms in the supply side scenario should also go hand in hand with increased income levels,” said PHD Chamber of Commerce in a statement.

The Seventh Pay Commission’s award will also put extra burden on the government’s coffers.  The Sixth Pay Commission, however, was an indirect stimulus to a recession-hit economy. It had supported economic growth in 2008-09.

The pay commissions, however, find very little support in policymakers and international institutions. A committee, headed by Cabinet Secretary B K Chaturvedi, had turned down a request for constituting the Sixth Pay Commission in 2005. The committee said the Centre might not be able to bear an additional burden and states were just recovering from the impact of the Fifth Pay Commission.

Timeline

* Decision advanced by a year
* To be implemented from January 1, 2016
* Plan panel member, industry bodies apprehensive
* Award will enhance govt’s wage bill
* Congress, employees’ unions hail decision