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Seventh CPC recommends 23.55% hike in Salary; OROP for Civilians too

The Seventh Pay Commission on Thursday recommended a 23.55 per cent increase in salary.

7th pay commission

Pay Panel recommendations to make an annual dent of Rs.28,450 Crore on Indian Railways’ expenditure

New Delhi: In a big bonanza to central employees and pensioners, the Seventh Pay Commission on Thursday recommended a 23.55 per cent increase in salary, allowances and pension along with a virtual one-rank-one-pension for civilians, involving an additional outgo of Rs 1.02 lakh crore a year.

A minimum pay of Rs 18,000 per month and a maximum of Rs 250,000 lakh per month has been recommended by the Commission, headed by Justice A K Mathur that presented its 900-page report to Finance Minister Arun Jaitley in New Delhi.

The recommendations, which are to be implemented from January 1, 2016, will benefit 47 lakh central government employees and 52 lakh pensioners.

The recommendations of the seventh Central Pay Commission will impact Indian Railways’ (IR) finances by Rs 28,450 crore annually. This is roughly 70 per cent of its budgeted wage bill of Rs 40,435 crore for this financial year, 2015-16.

The rise is to take effect from January 2016. It includes an additional Rs 11,350 crore on salaries, Rs 9,500 crore on pensions, Rs 4,000 crore on house rent allowance and Rs 3,600 crore on other allowances.

“The total impact of the pay commission recommendations would be around Rs 1 lakh crore, including Rs 74,000 crore for the general budget and around Rs 28,000 crore for the railways,” Finance Minister Arun Jaitley told journalists.

IR employs around 1.3 million people. Salaries and wages were nearly 24 per cent (Rs 35,565 crore) of its total expenditure of Rs 1,46,000 crore in 2014-15. The current year’s budgeted wage bill of Rs 40,435 crore is nearly a fourth of the total budgeted expenditure of Rs 1,63,000 crore.

The recommendations come as the railways ministry is struggling to meet a stiff Operating Ratio (money spent to earn Rs 100) target of 88.5 as against the 91.8 of FY15. The impact of the higher wage bill will worsen its finances, under stress due to declining passenger volumes.

A senior ministry official said this was a tough challenge and the railway board might ask for help from the finance ministry. “Unlike other departments, the railways pays its salaries and wages from its own pocket,” he noted.

Asked if a rise in fares was therefore likely, the official said that was “far-fetched”. The recommendations of the earlier, sixth, Pay Commission had led to a total outgo of Rs 72,000 crore in arrears for IR over the three years beginning 2006.

The award of the pay panel will also benefit staff of autonomous bodies, universities and public sector units, Jaitley said after receiving the report.

“In percentage terms, the overall increase in pay and allowance and pensions over the business-as-usual scenario will be 23.55 per cent,” the report said. Within this, the increase in pay will be 16 per cent, in allowances 63 per cent and in pension would be 24 per cent, it said.

The total salary and pension bill of the central government, which will also include Railway employees, will go up from estimated Rs 4.33 lakh crore to Rs 5.35 lakh crore during 2016-17.

The panel has suggested abolition of the pay band and the grade pay, though it retained the annual increment of 3 per cent.

It has also recommended a fitment factor of 2.57 which will be applied uniformally to all employees.