Friday, November 30, 2007

Heard on Street : Sixth pay commission report by Jan 1st week

        It is heard that the sixth pay commission will submit its report before January first week. The government wants to implement the recommendations before April. The recommendations of the commission is likely to be same as published here. There are also recommendations to retain professional talent. The government is also decided on increasing the retirement age. But this is not under the scope of the pay commission.

Sunday, November 25, 2007

Sixth pay commission should take into account inflation

Expressing the view that the present salaries of the Railway employees were not commensurate with inflation, the Southern Railway Mazdoor Union has sought interim relief.

In a release here, the Divisional secretary of the Union R.Kesavan said the Sixth Pay Commission should take into account inflation while formulating the recommendations.

"The railway employees should be paid on par with the other Public sector undertakings," he said.

The recommendations of the commission was likely to be released by April next, he said and demanded that they be implemented immediaetly,failing which they would be forced to resort to agitations, he said.

Saturday, November 24, 2007

Indian Railwaymen seeks four-fold increase in the emoluments

The National Federation of Indian Railwaymen (NFIR) will soon chalk out an action plan to achieve its primary demand of a four-fold increase in the emoluments of the estimated 14-lakh workforce by the proposed Sixth Pay Commission.

M. Raghavaiah, NFIR general secretary, was speaking to presspersons on Friday after addressing a meeting of employees in connection with the first-ever ‘secret ballot’ of recognised trade unions in the history of railways.

The elections will be held from November 26 to 28 in the 16 zones of the railways. Over 13.5 lakh employees will cast their votes. While the main contestants are NFIR and All-India Railwaymen Federation (AIFR), any union that gets 30 per cent of the votes will be declared as ‘recognised’.

Mr. Raghavaiah, who is also general secretary of SCR Employees’ Sangh, justified the demand saying a working day of a railway employee was uncomparable with any other job. “About 60 per cent of railway employees work in places that are far away from habitations and that do not have basic amenities, he said.

Friday, November 23, 2007

Retire at 62, counter pension liability

If implemented, the central government's proposal to hike the age of retirement of its employees from 60 to 62 will defer by two years its pension liabilities of around Rs 14,749 crore (Rs 147.49 billion), according to the Invest India Economic Foundation (IIEF).

At the same time, the salary burden on account of the 1,70,000 employees whose retirement will be deferred immediately by two years will be to the tune of Rs 9,784 crore (Rs 97.84 billion) for the two-year period.

This includes increments and indexation for future dearness allowance. The calculation, based on data from Invest India Market Solutions (the consulting practice of the IIEF), assumes an average monthly salary of Rs 21,800 under the forthcoming Sixth Pay Commission.

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.

According to the Budget estimate for the current fiscal, the total outgo on pay, allowances and travel expenses is Rs 46,379 crore (Rs 463.79 billion), around 11.60 per cent higher than in the last fiscal.

The hike in retirement age will be implemented for defence forces' personnel. State governments would also most likely follow suit.

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

Kavim Bhatnagar, who is on deputation from the Madhya Pradesh government with the IIEF, says, "With the raising of the age by two years immediately and the increase in the level of salaries and pensions due to the forthcoming award of the Sixth Pay Commission, the central government will be able to defer the pension payout for this group and pay them enhanced salaries."

In making the calculations, he has assumed that the recommendations of the Sixth Pay Commission for central government employees will be implemented in fiscal 2007-08.

The savings for the central exchequer shall be on account of deferred gratuity, commutation, first pension and leave encashment on retirement for the 1,70,000 employees.

Since these payments are paid out of the Consolidated Fund of India, the burden shall be reflected in the Budget, while another payment for this category - General Provident Fund and Family Benefit Fund of the Group Insurance Scheme - is paid out of the Public Account.

The proposal to increase the retirement age is being given final touches in the Ministry of Personnel, prior to being brought to the Cabinet for approval.
Source : Rediff

Wednesday, November 21, 2007

Debate on for Unified Civil Service

There is no unanimity between different Group-A central services and associations representing the All India Service officers (IAS/IPS) on whether a Unified Civil Service will suit India better.

The Sixth Central Pay Commission had sought response from different services on the case for a unified civil service by merging all Central (both technical and non-technical) and All India Services and whether there should be two distinct streams, one embracing all technical services and another for non-technical services.

The Indian Revenue Service (Customs and Central Excise) and the Indian Information Service associations supported the idea of unified civil services.

The IRS (C&CE) in its memorandum submitted to the Sixth Pay Commission has said "The recommendations of the IRS (C&CE) is to request the Pay Commission to recommend to constitute a Unified Civil Services pool or an Integrated Management Pool, by empanelling officers from various participating Group 'A' services to fill up posts of Joint Secretaries and higher level posts in ministries/departments of the center. The Government could lay guidelines, uniform for all services and conduct a screening by the UPSC."

The Indian Information Service Group 'A' Officers' Association has responded saying "There is a case for unified civil service. All those who come through the common civil service examination conducted by UPSC, be merged to a single service. This is the first step to end disparity among services and render equal treatment to all the services."

The Indian Revenue Service (Income Tax) differs from the IRS (C&CE) on the issue.

The IRS (IT) Association has said "In the age of specialisation or super-specialisation, the case for a unified civil service would be difficult to support. In fact, it is more important to end the glaring inter-service disparity and monopoly of one service over senior positions irrespective of the suitability of officers of that service for the post."

The Indian Administrative and Civil Service (central) association has recommended saying "There cannot be a complete unified civil service system. in fact, such an attempt will blur the focus from the IAS."

Increasing retirement age to 62 : A thought on it

The move to increase the retirement age of government employees from 60 to 62 years, as reported in this newspaper yesterday, can be endorsed on many counts. The average Indian's life expectancy at birth has gone up to over 66 years for men and 71 years for women. The last decision to increase the retirement age of government employees, to 60 years, was taken in 1998, when life expectancy for the average Indian was 63 years. Another increase in the retirement age now, on grounds of improved life expectancy, is therefore quite logical. There is also a social reason for postponing the age of retirement: as youngsters study for more years, they are dependent on their parents for far longer than used to be the case. Many family budgets get strained today because the main breadwinner retires before the next generation is settled in life.
The global practice also argues in favour of an upward revision in the retirement age. Several developed and developing countries have raised the retirement age to between 62 and 65 years. While the reasons vary from country to country, one common theme is the experience factor, which needs no elaboration. There are financial advantages as well. An increase in the retirement age will reduce the impact of the annual pension pay-out liability for the government for at least the period by which the retirement age is raised. The benefit of the reduced impact will come as a big relief, as it did in 1998, because the government's decisions to increase the retirement age and implement a new pay package for employees will most likely be taken at the same time. In other words, if the retirement age is not increased and the Sixth Pay Commission's recommendations for a pay hike are implemented, the central exchequer will take a bigger hit. Politically, a decision to raise the retirement age may earn for the United Progressive Alliance (UPA) the goodwill of an estimated ten million employees in the central and state governments. The UPA's coalition partners are also likely to reap electoral dividends from this, as the country heads for general elections in 18 months.
While these are all valid arguments in support of an increase in the retirement age, the government needs to keep in mind the impact at the entry level, because if no one retires for two years, then new recruitment too is likely to take a hit. In other words, those already in harness benefit, while those hoping to start their working careers will face more frustration; so postponing retirement has costs as well. It could also make worse the career stagnation that is already a problem in many government departments and services —those on a time scale get their promotions but stay in the same job, thus taking away much of the value of a promotion. So while it is true that retaining those with experience can add value, problems get created down the line.
It could also be argued that making 62 the age of retirement is far from being the most urgent reform required in the government's personnel policies. There are far more urgent and important issues waiting for attention, like the introduction of variable pay based on performance, a system for weeding out the non-performers, improving the quality of new recruits, creating the right environment for lateral entry, and so on. Some of these have been tried out but scuttled in practice, others have not been addressed at all. Changing the retirement age, if done, should be introduced simultaneously with these other, more important changes.

Tuesday, November 20, 2007

Govt finalising proposal to raise the retirement age to 62

Ten million govt officials, besides defence personnel, to benefit.
In a move that will benefit over 10 million central and state government employees, besides those in the defence services, the ministry of personnel is finalising a proposal to raise the retirement age of central government officials from 60 to 62 years.
If approved by the Cabinet, this will be the second time in nine years that the retirement age will be raised.
"Those who support the proposal feel it should be implemented in order to retain the collective experience. But there are people who say more young people shuld be brought into government services. We are discussing the matter," minister of state for personnel Suresh Pachauri told Business Standard. He declined to specify when the proposal would come before the Cabinet.
In 1998, the retirement age was raised from 58 years to 60, principally as a means of easing pension payments caused by a hefty increase in government salaries on the lines of the Fifth Pay Commission recommendations.
The move is expected to be politically beneficial for the ruling United Progressive Alliance (UPA) since the government servants constitute a large vote bank.
General elections for India's Parliament are due in early 2009 but the critical state elections in Gujarat and Himachal Pradesh will be held in December.
The move also comes ahead of a significant increase in salaries expected with the recommendations of the Sixth Pay Commission earl y next year.
The official reason for raising the retirement age is India's increasing life expectancy, which has improved from 62.86 years in 2000 to 68.59 years in 2007. The retirement age of the government officials in most developed nations ranges between 62 and 65 years.
The move is likely to have a significant impact on government finances which are now tied to Parliamentary commitments on fiscal prudence.
According to the Budget estimate for the current fiscal year (2007-08), the outgo on pay, allowances and travel expenses, excluding defence services, is Rs 46,379 crore, around 11.60 per cent higher than in 2006-07.
The central government has 3,32,1210 employees (excluding defence personnel) on its rolls, the number projected to go up marginally to 3,32,9682 in 2008.
The current retirement benefit for a retiring officer at the secretary level is around Rs 25 lakh, which is paid in one go. In addition, the pension is equivalent to 50 per cent of the last basic pay.
The move is also likely to impact state finances since the state governments typically follow the Centre's lead on such personnel policies.
The state governments are estimated to have a total of around seven million employees.
A serving secretary in the union government, who supports the move, said a decision will ultimately depend on the fiscal impact. Another secretary was a little skeptical.
"Personally, I feel it would be a retrograde move as it will lead to stagnation in the government. I feel 60 is a good age to retire at," he said.
A defence services official pointed out that the key benefit would be that the government will be able to tide over the pension liabilities for two years, especially as they would go up due to the Sixth Pay Commission award.

Sunday, November 18, 2007

Top retired army man suggests pay hike

With the Sixth Pay Commission working on its recommendations, a top former army officer has made a strong case for a 'generous' pay hike to defence personnel saying their turbulent lifestyle, limited career prospects and possibility of loss of life or limb should be taken into account for the purpose.

Maintaining that the average number of army men killed annually in active operations was 415 'when no war is being waged', former Vice Chief of Army Staff Lt Gen Vijay Oberoi said almost 5,000 personnel were invalidated on medical grounds every year due to stringent physical standards.

Observing that Indian Army had heavy counter-insurgency and counter-terrorism commitments, he said the average length of service of soldiers in such operations amounted to 10.87 years, compared with those in Western nations where it is not more than one year.

"Even those who volunteer for additional duties in some western countries do so for a maximum of two to three years throughout their carrier," Oberoi said in an article in the forthcoming issue of premier journal 'Indian Defence Review'.

Opposing any comparison of army personnel with those from the police or administrative services as their service conditions were 'unique', he said this "resulted in equating a colonel having 18-20 years service with a Superintendent of Police or a Deputy Commissioner of a district".

Thursday, November 15, 2007

Scrap Fiscal Act Target to compensate revenue defict by Sixth Pay Commission implementation

The Planning Commission, in its 11th Plan (2007-12) draft, has urged
side-stepping the zero-revenue deficit aim by 2009 that is mandated by
the Fiscal Responsibility and Budget Management (FRBM) Act. The 11th
Plan draft document, which was recently approved by the full Planning
Commission, held that maintaining zero-revenue deficit will
substantially limit the government''s ability to fund flagship
schemes. Finance Minister P Chidambaram has made it clear that the
government is bound by the FRBM Act, 2003, which mandates it to cut
the revenue deficit by a minimum of 0.5 percentage points every year.
In 2006-07, the Centre''s revenue deficit stood at 2 per cent of the
gross domestic product. The government has to eliminate this by March
2009. A zero-revenue deficit can restrict expenditure on health and
education, which creates human capital.

Revenue deficit is the difference between revenue expenditure and
revenue receipts. The Prime Minister''s Economic Advisory Council, in
its economic outlook for 2007-08, has said the central government''s
revenue deficit is unlikely to be removed by 2008-09 because of the
forthcoming Sixth Pay Commission's report and other unforeseens.

Tuesday, November 13, 2007

Sixth Pay Commission will not recommend raising retirement age.

The Sixth Pay Commission for central government employees will not recommend raising the retirement age.

"No," finance minister P. Chidambaram said today when asked whether the age, now at 60 years, would be increased.

The minister, speaking at a conference of economic editors today, said the commission's report would be handed in by April. Former Supreme Court judge B.N. Srikrishna, who authored the report on the 1993 communal riots in Mumbai, is heading the pay commission.

The blow to hopes of a higher retirement age comes days after Planning Commission deputy chairman Montek Singh Ahluwalia argued against revision of salaries by the commission.

"There is no case for a pay increase now because erosion of income (because of inflation) is taken care of by indexation (dearness allowance)," Ahluwalia had said.

Earlier, the Eleventh Plan (2007-12) document had warned of problems for government finances if the pay hikes were not capped. "With the commission's impact looming, hard-won gains on the fiscal front could be jeopardised."
Source : The Telegraph

Monday, November 12, 2007

S&T and R&D to be liberalised ?

Planning Commission has admitted that India's investment in R&D remains far below the level required for a country aspiring to emerge as an economic and knowledge superpower.

The draft of 11th Plan,likely to be put for National Development Council's approval early next month, also stresses upon the promotion of basic research in science, engineering and medicine as a "critical input" for development.

"To promote basic science research in academic and research institutions, there is need of a well-defined focussed approach for building an infrastructure of equipment, facilities in colleges/universities/institutions," says the draft in its chapter 'Innovation and Technology'.

Mere investments, the plan panel asserts, would help only partially and there is also a need to increase the efficiency of the delivery system so that resources are made available to R&D groups much faster.

It has also called for a "mechanism" which would formulate and implement programmes and play a role in upgrading research infrastructure, besides attracting a new generation of students and faculty into the research system.

"Most of the institutions have aged collectively with a consequent decline of their research profile. Vigorous and attractive recruitment policies need to be introduced in the Indian science and technology (S&T) system," says the paper.

Post-liberalisation, the remuneration mismatch between state-supported R&D bodies and similar private or foreign institutions has made basic or applied research highly unattractive. For instance, as TOI reported on September 6, only one government agency, Isro (Indian Space Research Organisation), lost 392 scientists in last 36 months — an attrition rate of 11 per month.

The Plan document recognises the problem and calls for "flexibility in the salary support and start-up grant" as a means to attract good talent to basic research. The Sixth Pay Commission, expected to submit its report early next year, has also received petitions from various scientific bodies and ministries, calling for a substantial increase in the remuneration packages.

The panel has favoured a liberal opening up of the S&T and R&D systems that have mostly worked behind a wall of opaqueness since independence. "There is a need for improving inter-institutional linkages to quickly enhance scientific activities within the university system. Focus is also required on initiating programmes to promote establishment of technology-business incubators in universities, which support scientists to start commercial activities based on indigenous technologies developed at their institutions," says the paper.

According to the panel, such technology transfer can help in the implementation of ventures, especially those with low capital start-up. In support of the new partnerships, it has stressed the need for industries with active R&D divisions to recruit research students working in basic science areas related to new technology demands.

Friday, November 9, 2007

No reason to raise pay of govt employees: Panel

The Planning Commission sees no reason to increase the salary of government employees as it feels that wages are already linked to price rise.

"There is no case for pay increase (of government employees) because erosion of income is taken care of by indexation," panel's Deputy Chairman Montek Singh Ahluwalia told reporters after the end of the full plan panel meet.

"With the Sixth Pay Commission's impact looming large, hard-won gains (on fiscal front) could easily be jeopardised," according to the draft Eleventh Plan document approved by the the Commission.

Pointing out that the Pay Commissions were relevant earlier when a large portion of the salary was not indexed, Ahluwalia said the sixth pay panel would take into account the fiscal circumstances while making its recommendations, likely sometime in April next year.

The document further stressed it is imperative that utmost vigilance be maintained against any deterioration in the fiscal situation.

Tuesday, November 6, 2007

Retirement Age

There were rumors in same news papers the the retirement age to be increased to 62 as per the recommendations of the sixth pay  commission. This assumptions was made on the basis of extension of services of space and atomic energy chairmen. However it is learnt the commission does not wish to propose the change of retirement age from the existing 60. Also it is difficult to think that the the government will take a positive step von this ignoring the opposition from the left. However the retirement date will be unified to December 31st. That means an effective increment of of one year for those whose date of birth falls in January. Also the sixth pay commission is planning for an option of re-employment - to utilize the service of experienced professionals. But this will not be an detention of service, rather it will be like a contact.

Monday, November 5, 2007

Performance linked pay. What does it mean?

In his interview Hon'ble Justice Sri Krishna hinted about the performance linked incentives to the central government employees in the sixth pay commission recommendation. It is neither appropriate nor desirable to introduce such a thing. It will give chance to 'chamchagiri' and create a lot of heart burn. Earlier in one of the autonomous scientific organizations such a scheme called "Merit Promotion" was introduced but later withdrawn. Let us hope that the Commission will not provide any loopholes for the employers (superiors) to use more powers at their whims and fancies. The CRs itself is a waste and if we introduce another angle to it, it will create even more problems.

Saturday, November 3, 2007

Maharashtra to implement Sixth Pay Commission recommendations without much fuss and delay

It is good news for two million employees of the Maharashtra government as senior officials of the state government have indicated that the state will implement the recommendations of the Sixth Pay Commission without much fuss and delay. But, this means the state exchequer takes a hit of around Rs 4,000 crore to Rs 5,000 crore.
The confidence of senior state government officials arose from the booming economy and buoyancy in the tax revenues who had a horrid time while managing the state’s finances at the time of the implementation of the Fifth Pay Commission report.
Earlier this week by going on a one-day token strike, by both the Centre and state government employees, for implementation of the Sixth Pay Commission recommendations, unions have managed to bring the issue to the fore.
With the shadow of the mid-term poll looming large over the Centre, it is expected that the announcement of the acceptance of pay commission’s recommendations by the Centre will be done sooner than later.
However, the implementation of the Fifth pay commission broke the back literally of many state government’s finances and they had to divert funds from development projects for paying wages, salaries and pensions of government employees.
Speaking to Business Standard a senior official from chief minister’s office said, “After implementation of Fifth Pay Commission’s report, state finance had taken a massive hit as during the period between 1999 to 2003, we even had to cut our plan expenditure on various infrastructure and social sector projects.”
However, the state had to cut down on development projects to pay employees because revenues didn’t kept pace with the increase in expenditure on employees.
This primarily happened as economy was going through recession and tax collection was not showing any significant rise. However since 2003 economy has done the turn around and our tax revenues are soaring.
Revenues from stamp duty and registration alone have increased from around Rs.2,500 crore in 2003-04 to Rs 6,000 crore in 2006-07. This is despite reducing the stamp duty from average of 10 per cent to 5 per cent, he pointed out.
Besides, this we have also maintained tight leash on the expenditure side and reduced expenditure on non-planned heads from high of around 45 per cent in 2003-04 to around 38 per cent of the total budgetary outlay.
Maharashtra government did not have to do any off-budget borrowings since 2005-06.
So, we feel even if there is a burden of between Rs 4,000 crore to Rs 5,000 crore, the state will be able to absorb it provided the sixth pay commission recommendations are implemented from January 1, 2007 and not from January 1, 2006 as demanded by the employees union, he said.
It is always better that the state accepts the principle of implementing the pay commission’s recommendations to state government employees as well and follow it than face strikes, dharnas and morchas from each government department for an increase in the salaries and pensions and bring the administration to a grinding halt, he pointed out.

Thursday, November 1, 2007

Sixth Pay Commission : Does Govt have money for implementation?

The government of India is a big gainer from the surge in the Sensex. The gains are sufficiently large to take care of the potential impact on the exchequer of the recommendations of the Sixth Pay Commission. In conceptual, if not in practical terms, the government is sitting pretty.

The market capitalisation of 29 listed PSUs has soared from Rs 2,34,000 crore on June 1, 2004, shortly after the UPA government took over, to Rs 10,90,000 crore on October 24, 2007. The current value of the government’s shareholding in these PSUs works out to a colossal Rs 8,80,000 crore — enough to wipe out a quarter of the total public debt.

A mere 10% sale of its portfolio would fetch the government over Rs 88,000 crore. That is around 2% of GDP, more than adequate to cover the immediate impact of the Sixth Pay Commission on GDP, which is expected to be of the order of 1% of GDP. It is the impact of any wage award in the initial two or three years that is lethal. Over time, as nominal GDP rises at around 13%-14% annually, the impact declines progressively as a proportion of GDP.

The government has stakes in banks as well. The market capitalisation of public sector banks (PSBs) has shot up in the same period from Rs 69,000 crore to Rs 232,000 crore. Government shareholding in these PSBs is today worth Rs 145,000 crore. (Some of the PSBs have been listed post 2004, hence do not figure in the comparison in market capitalisation between 2004 and 2007).

The fiscal deficit of both the Centre and the states has been showing a downward trend. Total public debt too has begun to decline. These declines understate the extent of the improvement.

If the fiscal deficit is interpreted as a change in net worth of government, the rise in the value of government shareholding in public sector companies also implies a decline in the fiscal deficit. Take this into account and the Sixth Pay Commission loses much of its terrors.

Some will say that this is all notional. The Left will not allow disinvestment in PSUs to proceed. The government cannot, under the present statutes, sell its equity in PSBs. Maybe there is an improvement in conceptual terms but this will not be reflected in cash flows.