Financial Impact of implementation of 7th Pay Commission – Media reports and 7th CPC projections are wrong – Confederation comes out with data and says that additional financial burden to Govt as a result of net increase in pay and allowances on implementation of 7th Pay Commission is Rs. 40,000 crores and not Rs. 1,02,100 Crore projected by 7th Pay Commission and Media reports
Comrades,
There are various reports in the media about the impact of the 7th CPC recommendations on the common man and the government resources at large, the reports suggest that the Government may postpone the 7th CPC implementation also till its finances are set right.
These reports are totally wrong.
A) Let us examine the Revenue Secretary Shri Hasmukh Adhia statements which are also published in the news papers.
“So far, 1.8 crore refunds for assessment year 2015-16 have been processed, he said. In the past, refunds have been held up for years as the government sought to show healthier finances.”
“Data released by the government showed that over Rs 5 lakh crore was locked up in tax disputes at various levels, with some of the cases going back over 10 years. In value terms, over half the cases related to income tax with 30% of the cases involving corporation tax.”
B) The crude oil prices has come down from 140 $ to just 30$ a barrel in last year thus the Central Government finances have improved a lot.
The Revenue Secretary Shri Hasmukh Adhia statements also indicate that the government sought to show healthier finances. and the Central Governement should accept the Staff side demands regarding minimum wage, fitment formula & allowances. There is no case for extension of time limit for extension of the 7th CPC implementation. Hence the news paper reports are totally wrong.
The news paper reports also suggest that additional amount of Rs one lakh crores of public money has been spent for implementation of the 7thCPC recommendations for 35 lakhs central Government employees, 15 lakhs defence employees and 55 lakhs pensioners , perhaps the strongest criticism of Pay Commission awards is that they play havoc with government finances and also state government demand support to implement the 7th CPC recommendations. At the aggregate level, these concerns are somewhat exaggerated and which is totally wrong.
Let us note following important points:
- The DA amount increase is on basic pay only and also Transport allowance is increasing .
- The wage hike annually is around 15% .
- The numbers of retired persons are more in the last 5 years compared to new recruiters. Even the vast difference between the wages of new person joining the Central Govt and retired person.
- The difference between the actual wage hike as indicated in the 7th CPC and the website of Government of India Ministry of Finance Department of Expenditure Pay Research Unit for Brochure on Pay andAllowances of Central Government Civilian Employees.
- The difference between the actual wage hike as indicated in the 7th CPC and the Finance Minster statement on the floor of the House on the Medium term Expenditure Framework Statement laid before Parliament during August, 2015.
- PAY RESEARCH UNIT DEPARTMENT OF EXPENDITURE MINISTRY OF FINANCE NEW DELHI brings out a report on pay and allowances of Central Government civilian employees on an annual basis which include the Ministry of Railways, Ministry of Home Affairs, Department of Posts, Ministry of Defence (Civil), UNION TERRITORY and other 100 departments. According to them the REGULAR CIVILIAN EMPLOYEES IN CENTRAL GOVERNMENT AND UNION TERRITORY ADMINISTRATIONS AS ON 1.3.2013 is 31,80,608 persons.
- According to the Defence Minister statement in Parliament strength of defence personnel is around 15 lakhs persons (Army Officers 38574, Other Ranks, 1132473, Navy Officers 8896 , Sailors 51608 , Air Force Officers 11918 , Airmen 130209)
- The 7th CPC has abolished many allowances, which is not reflected in the actual impact on hike.
- The 7th CPC in its report vide para no 16.1 has indicated that the total expenditure for the year 2016-17 towards Central Government Employees including, Civilians, Railways , Defence personnel before implementation of the 7th CPC report asRs 4,33, 500.00 crores which include Pay of Rs 244300.00 Crores , Allowances which include HRA Rs 12400.00 crores, other Allowances Rs 24300.00 crores, PensionRs 142600.00 crores.
- The 7th CPC in its report vide para no 16.1 has indicated that the total expenditure for the year 2016-17 (With VII CPC) as Rs 5,35, 600.00 crores which include Pay of Rs 283400.00 Crores , Allowances which include HRA Rs 29600.00 crores, other Allowances Rs 36400.00 crores, Pension Rs 176300.00crores.
- The 7th CPC has also stated that total financial impact in the FY 2016-17 is likely to be ₹1,02,100 crore, an increase of nearly 23.55 percent over the Business As Usual scenario.
Now with the facts of the case is that the expenditure as stated in the above 7th CPC report is not true in nature. This 7th CPC in its report vide para no 16.1 has indicated that the total expenditure for the year 2016-17 (With VII CPC) as Rs 5,35, 600.00 is not all true the figure is not likely to cross 3.5 lakhs crores including pension amount.
Expect HRA no other allowances has increased, HRA has increased by just 106% over the existing amount.
- Out of the total expenditure of Rs 5890.63 crore on HRA in 2013-14, the HRA expenditure for X class cities is Rs 2541.55 crore which is around 43.14% of the total expenditure on HRA.( Finance Ministry statement)
- Majority of the Central Govt Employees don’t avail HRA and many employees reside in “C” class city. . Indian defence personnel including Army personal stay in the military camp .
- The 7th CPC had indicate that the HRA expenditure Rs 12400.00 crores against the Finance Ministry statement of Rs 5890.63 crore on HRA. It has also projected that Rs 29600.00 cores expenditure on HRA which is not true as total expenditure on HRA is not likely to be more than Rs 13,000/- crores.
Let us examine the 7th CPC report vide para no 3.65 and 3.66 and the website of Government of India Ministry of Finance Department of Expenditure Pay Research Unit for Brochure on Pay and Allowances of Central Government Civilian Employees
The 7th CPC report para number 3.65 and 3.66
The Commission has obtained details of expenditure from each ministry/department for up to FY 2012-13. Of the total expenditure on pay and allowances of Rs 1,29,599 crore for the financial year 2012-13.
If you compare these figures with PAY RESEARCH UNIT DEPARTMENT OF EXPENDITURE MINISTRY OF FINANCE NEW DELHI expenditure statement for the year 2012-13 please refer website of
finance ministry
The total expenditure on Pay and Allowances (excluding Productivity Linked Bonus/ Ad-hoc Bonus, Honorarium, Encashment of Earned Leave and Travelling Allowance) for Regular Central Government Civilian employees including employees of the Union Territories Rs 108070.66 crore in 2012-13. This expenditure includes Ministry/ departments like Ministry of Railways, Ministry of Home Affairs, Department of Posts, Ministry of Defence (Civil), UNION TERRITORY and other 100 departments
Hence the 7th CPC para number 3.65 is wrong.
There are four possibilities of checking the 7th CPC statement of para no 16.1,
1st possibility is as follows:
The salary and allowance expenditure or the year 2013-14 is Of the total expenditure on pay and allowancesofRs 1,27,000 crore for the financial year 2013-14. Which include the Ministry of Railways, Ministry of Home Affairs, Department of Posts, Ministry of Defence (Civil), UNION TERRITORY and other 100 departments as per the PAY RESEARCH UNIT DEPARTMENT OF EXPENDITURE MINISTRY OF FINANCE NEW DELHI expenditure statement for the year 2013-14.
Add 35% increase expenditure 44,000/ crores ( add 25% DA)
Add Pension amount of Rs 90,000 crores
Add Defence employees expenditure of Rs 70,000/-
So total expenditure is 3,31,000 crores
Add 14% increase in wage hike on 2.75 lakh crore for serving employees and 20% hike for pensioners . Which works out to Rs 60,000/- crores increase not one lakhs crores. Deduct Rs 10,000/ cores as Income tax, CGEIS and increased CGHS, licensee fee rates. Deduct abolition of allowances amount of Rs 10,000/- crores. Net additional burden for Central Govt. is Rs 40,000/- crores.
DA amount increase (2nd possibility):
The increase is in accordance with the accepted formula, which is based on the recommendations of the 6th Central Pay Commission (CPC). The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be in the order of Rs. 6655.14 crore per annum and Rs.4436.76 crore in the financial year 2015-16 (for a period of 8 months from July, 2015 to February, 2016).
DA increase for 50 lakhs employees is Rs. 6655.14 crores per annum * 12/ 8 = Rs 9982 crores for 6% increase in DA, for 14% wage hike it is 9982*14/6 = Rs 23292 crores.
DA increase for 55 lakhs employees is Rs. 4436.76 crores per annum * 12/ 8 = Rs 6655crores for 6% increase in DA, for 14% wage hike it is *14/6 = Rs15528 crores.
So total additional expenses for wage hike is Rs 38820 crore add Rs 6,000/- towards HRA increase and additional pension hike of Rs 5,000/- so total hike is around Rs 50,000/- crores. Deduct Rs 10,000/ cores as Income tax, CGEIS and increased CGHS, licensee fee rates. Deduct abolition of allowances amount of Rs 10,000/- crores. Net additional burden for Central Govt. is Rs 30,000/- crores
3rd Possibility Pay commission statement :
Let us examine para no 3.66 of the 7th CPC report the expenditure per capita on pay and allowances for Civil Central Government personnel for FY 2012-13 was Rs 3.92 lakh per annum i.e Rs 32666/- per month taking into account of DA percentage as 80%. (take basic pay of Rs 15,000/-)
Add 45% DA for the period 1/4/2013 to 1/1/2016 average salary of Civil Central Government personnel as on 1/1/2016 at 125% DA which works around Rs 37500/- per month (Rs 4.50 lakhs per annum ) without 7th CPC recommendations .
Multiply by 50lakhs CEG employees including Defence employees , Railways , Home, Postal etc. it works out to 2.25 lakhs crores. So total expenditure on salary as on 1/1/2016 is at 2.25 lakhs crores. Add pension amount of Rs 1 lakh crores hence total expenditure is at 3.25 lakh cores .
The 7th CPC in its report vide para no 16.1 has indicated that the total expenditure for the year 2016-17 towards Central Government Employees including, Civilians, Railways , Defence personnel before implementation of the 7th CPC report as Rs 4,33, 500.00 crores , In this case the difference works out to more than one lakh crore .
Add 14% increase in wage hike on 1.75 lakh crore for serving employees and 20% hike for pensioners . Which works out to Rs 60,000/- crores increase not one lakh crores. Deduct Rs 10,000/ cores as Income tax, CGEIS and increased CGHS, licensee fee rates. Deduct abolition of allowances amount of Rs 10,000/- crores. Net additional burden for Central Govt. is Rs 40,000/- crores.
4th Possibility is as follows:
Medium term Expenditure Framework Statement laid
Before Parliament by Minister of Finance August, 2015
Budget Projection for Estimates 2015-16: Revenue Expenditure
1) Salary Rs 100619 crores
2) Pension Rs 88521 crores.
3) Add for Railway employees Rs 45,000/- crores.
4) Add for Defence employees Rs 60000/ crores
Total Expenditure on salary and allowances including pension amount is 2,91,000 crores.
Add 14% increase in wage hike on 1.90 lakh crore for serving employees and 20% hike for pensioners . Which works out to Rs 65,000/- crores increase not one lakh crores. Deduct Rs 10,000/ cores as Income tax, CGEIS and increased CGHS, licensee fee rates. Deduct abolition of allowances amount of Rs 10,000/- crores. Net additional burden for Central Govt. is Rs 45,000/- crores.
Hence the net increase in salary and pension is just around Rs 40,000/- crores not Rs one lakhs crores as stated in the 7th CPC out of which 15,000/ crores is for Defence employees, Rs 15,000 crores by the Railway’s . The 7th CPC projections of 5.5 lakhs cores expenditure is also wrong.
The Central Governement should accept the Staff side demands regarding minimum wage, fitment formula & allowances. Hence the news paper reports are totally wrong. We need to educate the members and prepare for a strugle.
Comradely yours
(P.S.Prasad)
General Secretary
