In poll year, govt sets up 7th pay commission.Recommendations are likely to come into effect from 2016 calender year

   Call it a poll compulsion or genuine desire to help the government servants--the Centre on Wednesday decided to constitute the seventh pay commission for its 50 lakh employees and 30 lakh pensioners.

While analysts expect a burden of Rs one lakh crore a year from the seventh pay commission awards, the finance ministry said-- don't pre-judge the issue, first terms of reference be decided.

Officials said next in the offing could be a decision to increase the retirement age of government employees to 62 years from the current 60. .

"Prime Minister (Manmohan Singh) has approved the constitution of the seventh Central Pay Commission," Finance Minister P Chidambaram said in a statement here.

Unlike the previous time, the commission will come over three years prior to the year when its recommendations are to take effect. In July, 2006, the Cabinet had approved setting up of the sixth pay commission, whose recommendations came into effect from January, 2006. But, it was because the NDA government had initially refused to set up the commission, a point on which the Congress today tried to beat the main opposition Bharatiya Janata Party (BJP).

"NDA rejected the legitimate formation of 6th Pay Commission in 2003.The Congress set up 6th Pay Commission in 2005, now again the 7th CPC in 2013," Party general secretary in-charge for Communication Ajay Maken tweeted.

The then finance minister had told that there was no need to constitute the sixth pay commission since 50% dearness allowance was already merged with the basic pay.

When asked whether fiscal consolidation exercise of the government will not be affected as it is estimated that the exchequer will tke a hit of Rs one lakh crore from the recommendations of the seventh pay commission, a senior finance ministry official said "how can you estimate the burden on the exchequer. Now even, the terms of reference has not been decided."

The year 2016-17 will be the terminal year of a five-year fiscal consolidation road map announced by the Finance Minister. By then, the government aims to bring down the Centre’s fiscal deficit to three% of GDP. In 2012-13, the first year of the road map, the deficit stood at 4.9% of GDP. For 2013-14, the plan is to reduce it to 4.8% and then by 0.6%age points each year.

To a query whether the government be allowed to set up the commission as the model code of conduct will come into effect due to polls to five assemblies, the official said the decision has been announced and hence setting up of the commission will not violate the Election Commission's guidelines.

He said the department of personnel will now start discussions with staff associations of government employees for announcing constitution of the commission as well as its terms of reference. It will be set up in a one month time, he said.

The finance ministry tried to allay the speculation that the commission was set up to woo the 80 lakh government employees, pensioners and indirectly their dependents to the ruling coalition in an election year. There were 72.5 crore electorate in India, according to 2011 census.
Source:Business Standard