Economy

7th Pay Commission: Government Approves Pay Hikes, Does Away With Pay Grades

A file photo of Finance Minister Arun Jaitley (L) and Prime Minister Narendra Modi (R). Credit: Reuters

A file photo of Finance Minister Arun Jaitley (L) and Prime Minister Narendra Modi (R). Credit: Reuters

New Delhi: On Wednesday, June 29, the union cabinet approved recommendations made by the 7th pay commission in November. The decision was taken in a meeting chaired by Prime Minister Narendra Modi, sources said. The government in January had set up a panel under cabinet secretary P. K. Sinha to process the recommendations.

The commission, chaired by Justice A. K. Mathur, had recommended in its report an overall increase of 23.55% in salaries and allowances for over one crore government employees and pensioners, along with an annual increment of 3%.

According to the Indian Express, this hike would include a 16% increase in basic pay, a 63% increase in allowances and a 24% hike in pensions.

The 900-page report also recommended a minimum monthly pay of Rs 18,000 (up from the current Rs 7,000) and a maximum monthly pay of Rs 2.5 lakh (up from Rs 90,000).

The increase in salaries is expected to cost the taxpayer over Rs 1 lakh crores annually, or close to 0.7% of the GDP. It is also the smallest recommended amount in 70 years, at 14.27% for basic pay at junior levels. The previous pay commission had recommended a 20% increase in basic pay, which the cabinet had deemed too low and doubled in 2008.

Finance minister Arun Jaitley said in a statement, “The total monetary impact [of the proposed hikes] 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.”

While the Budget for 2016-17 did not provide an explicit provision for implementation of the 7th Pay Commission, the government had said the once-in-a-decade pay hike for government employees has been built in as interim allocation for different ministries.

NDTV reported that one of the fundamental changes proposed by the report is the ‘new pay structure’, which will do away with pay grades or pay bands. This essentially means a one-rank one-pay scheme – despite it not being called that – for all government employees, including military personnel.

“The Commission recommends a revised pension formulation for civil employees including CAPF personnel as well as for Defence personnel, who have retired before January 1, 2016. This formulation will bring about parity between past pensioners and current retirees for the same length of service in the pay scale at the time of retirement,” explained Justice Mathur.

(With PTI inputs)