Saturday, February 22, 2014

Merger of DA with Pay and Interim Relief – Govt yet to issue Statement

According to various news Cabinet has confirmed 7th CPC Terms of Reference, inclusion of DA merger as Interim Relief speculated by media and confederation:-

Merger of DA with Pay, granting interim relief and enhancing superannuation age are definitely being actively considered by the Govt.  Hindu Business line, Business standard, Economic times  and Vijaya Karnataka News papers has published it was discussed in the union Cabinet meeting & same has been approved. As per newspaper reports the decisions taken are to refer to 7th CPC regarding DA merger &  IR. If these reports are true then we have to wait for next week for notification orders.

The  Government has not issued any statement so far on this issue. Finance Minister Shri P Chidambaram will visit Australia as per the schedule he will attend the G20 meeting on February 22 and 23, followed by investor conferences on February 24 and 25. and if the above reports are not correct then it is most likely that cabinet will take any decision only after his return from abroad. So good news may be expected in the next weekend.



See some News Articles with date & Time of publication
Hindu Business Line reports as follows (Feb, 20 Morning)
Ahead of general election, the Centre today took key decisions to woo minorities and Government employees.

For minorities, the Cabinet has decided to form equal opportunity commission as suggested by Sachhar Committee. This commission will suggest ways to ensure equal opportunities in jobs, education and even finding house on rentfor minorities. The commission is expected to be constituted soon.


Terms of reference for 7th pay commission

In order to benefit over 50 lakh employees and over 30 lakh pensioners, the Cabinet also approved terms of reference for seventh pay commission. This includes merging dearness allowance above 50 per cent with basic pay. Currently DA is around 90 per cent of basic pay and another hike of 10 per cent is expected soon. DA is calculated on the basis of change in retail inflation.

The Economic Times Reports as follows (20th Feb Noon)
“The government has cleared a flurry of proposals including setting up a coal regulator, terms of reference for the new Pay Commission, upgrading 7,200 km of roads into national highways and aRs 6,400 crore equity investment by GlaxoSmithKline to raise its stake in its Indian arm. ……….
The cabinet also approved the terms of reference of the seventh pay commission, which will cover 35 lakhgovernment employees and defence personnel. It will be headed by retired Supreme Court judge Ashok Kumar Mathur.
It will submit its report in 19 months and the award will be effective January 2016, the government had said earlier this month.”
Souce : The Economic Times

Hindu Business Line reports as follows (Feb, 20 Evening)
“The Cabinet approved the terms of reference for the 7th Pay Commission. Government officials said that these include merging of dearness allowance (DA) with basic pay.

Earlier, the DA was merged with basic pay, only after it touched 50 per cent of the basic pay. The merger will help in drawing higher allowances as these are a proportion of the basic pay.”
It is estimated that the merger will raise salaries by up to 30 per cent

The Sixth Pay Commission did not talk about a merger. The result is that with continuous increase, DA has now reached up to 90 per cent of the basic pay. A DA revision has been due since January 1 and it is expected that the decision to hike DA by 10 per cent will be taken in the next few days.

If that happens, then DA will be equal to the basic pay. Employees unions are pressing hard for a merger of DA with basic pay.

The Government announced the setting up of 7th Pay Commission in 2013.

Source : The Hindu Businessline

Business Standard reports as follows (21st Feb, Morning)
7th Pay Commission should do a Murthy on central govt employees

“Among the flurry of proposals cleared by the cabinet yesterday was the terms of reference for the new Pay Commission.  Despite economic growth taking a tumble – from over 9% to sub 5%  - and the government caught in a fiscal bind as revenues diminish, non plan expenditure is all set to swell as government babus get a boost in their salaries with the 7th Pay Commission kicking in from 2016.

The outflow from the central exchequer will be massive. The previous commissions have cost it as much as Rs 2 lakh crore (excluding expenses for railway and state government employees) and severely impacted the fiscal situation of both the central exchequer and departments like the railways, the aftereffects of which are being felt till date. Nonetheless, analysts expect the 7th panel to suggest 3-3.5 times hike in salaries across various grades according to some reports, with the government even considering merging 50% DA (which in itself will be increased by 10% to 100% by end of February) with basic pay of employees, which would further negatively impact outgo on other allowances like the house rent allowance (HRA).

With inflation averaging at 9% in the last few years, the need for an increase in pay for the over 7 million centralgovernment employees cannot be a point of debate. We can also discount for a moment the quantum of hikes, even though salaries have tripled every 10 years – a much faster growth rate than in the private sector according to an analysis done by The Hindu Business Line which estimates that the average wage of a factory worker in HULincreased by less than 2.67 times over 10 years despite not being protected under the law from being fired. What needs active political deliberation though is the terms of the hikes and the weight given to performance before deciding on the quantum.

For decades, even as service delivery hasn’t improved very much, government employees continue to remain the most sheltered bunch of citizens as far as appraisals are concerned – protected by law on termination and rarely, if ever, gauged on productivity and performance linked targets. According to a 2012 report in the Economic Times while the first three commissions did not consider performance linked incentives, the 4th Commission suggested variable increments to reward better performance, the 5th Commission recommended a variable pay strategy for exceptionally meritorious performance while the last commission proposed a performance related incentive system (PRIS) to offer monetary perks over and above salary for better performance.

The 6th Commission also put forward variable increments for Group A employees with high performers being allowed nominal increments at 1% higher than the majority. RFDs or results framework documents have also been developed where departmental targets are set at the beginning of the year and outcomes measured before assigning a performance rating. But most of these have either remained on paper with no credible movement on implementation or are half baked, ambiguous and non-comprehensive according to experts.

It is time for the 7th Commission to give a face-lift to the overall pay-structure and introduce an effective performance-linked system of giving salary hikes, even introduce a termination warning clause perhaps to weed out absolute turkeys. At a time when private sector majors like Infosys have decided to take a tough stand on non-performers with Executive Chairman N R Narayana Murthy explicitly stating that those not delivering will have to bid good-bye, the centre by rewarding, rather than hauling up non-performing public sector workers is sending out a wrong signal. Not only is it seen as pandering to a 7 million strong vote bank ahead of the elections, but will also be perceived as a government that is punishing the honest citizen by slashing planned expenditure for public good and using the tax payer’s money instead to reward a lethargic, non-accountable bureaucracy.

Explicitly linking pay to performance will also encourage the bureaucracy to shake off the perceived paralysis, speed up decision making and improve service delivery – all critical non-legislative reforms needed for the economy to get its mojo back and the government to restore its image.”

Source: Business Standard

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