7th CPC and Central Government finances

Comrades,

          There are various reports in the media about the impact of the 7^th 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 one year thus the Central Government finances have improved a lot. 

Source: CLICK HERE .

Finance Secretary Shri Ratan Watal statement: 

"The pay commission award is from Januray 1. 2016 but it is likely to be implemented from next years and employees paid arrears. By the time it is implemented, it goes into next financial year and our growth prospects are good, our economy is pretty robust"

SOURCE: CLICK HERE

The Revenue Secretary Shri Hasmukh Adhia & Finance Secretary Shri Ratan Watal statements also indicate that the  Government sought to show healthier finances and the Central Government  should accept the Staff side demands regarding minimum wage, fitment formula & allowances. 

  If the Government is serious about revenue collection then it can collect about 2.5 lakhs crores of pending tax dispute amount of more than 5 lakhs crores, this will benefit the tax payer and the Government servant as well. 

 There is no case for extension of time limit for extension of the 7th CPC implementation to next year. This report will be implemented in May or June 2016. 

The news paper reports also suggest that additional amount of    Rs  one lakh crores of public money has been spent for implementation of the 7^thCPC 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 7^th 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 7^th CPC has abolished many allowances, which is not reflected in the actual impact on hike.   

·        The difference between the actual wage hike as indicated in the 7^th CPC 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 difference between the actual wage hike as indicated in the 7^th 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 is around 15 lakhs persons

 (Army Officers 38574, Other Ranks, 1132473, Navy Officers

8896 , Sailors 51608 , Air Force Officers 11918 , Airmen 130209)

* 18.6 lakh Defence forces pensioners on 01.01.2014

The 7^th 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, Ministry of Home, Department of Post etc before implementation of the 7^th CPC report as Rs 4,33, 500.00 crores which include Pay   of Rs 2,44,300.00 Crores , Allowances which include HRA Rs 12,400.00 crores, other Allowances Rs 24300.00 crores, Pension Rs 142600.00 crores.

  The 7^th 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 7^th 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 7^th CPC report is not true in nature. This  7^th 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.

   

Defence Salary and allowances Expenditurer Rs 75,000/- crores

Source:  IDSA Institute of Defence Studies and Analyses

Please refer:  

Expenditure Budget Vol. I, 2014-2015 (NON-PLAN EXPENDITURE 2014-2015)

Non-Plan expenditure covers all expenditure of Government not included in the Plan

Ref: http://indiabudget.nic.in/budget2014-2015/ub2014-15/eb/npe.pdf

10.07 Pensions amount (Rs 81,705 crore) 

The Medium Term Fiscal Policy Statement - Union Budget

 Pensions: 

42. The expenditure on pension payments of the Central Government includes both defence as well as civil pensions. Pension payment, in nominal terms was estimated at Rs 74,076 crore in RE 2013-14 and at the year-end it was accounted at Rs  74,896 crore. In BE 2014-15, pension payment in nominal terms was estimated at Rs 81,983 crore. In RE 2014-15, it has been revised at Rs  81,705 crore. (18.6 lakh Defence forces pensioners on 01.01.2014) 

Source : http://indiabudget.nic.in/ub2015-16/frbm/frbm2.pdf

Let us examine the 7^th 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 visit website :http://finmin.nic.in/pru/BROCHURE/PayAllowance2013-14E.pdf.

PAY AND ALLOWANCES 2013-14 finmin.nic.in CLICK HERE FOR BROUCHER

The 7^th 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 websitehttp://finmin.nic.in/pru/BROCHURE/brochure2012-13.pdf

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 7^th CPC para number 3.65 is wrong.

There are four possibilities of checking the 7^th CPC statement of para no 16.1,    

1^st possibility is as follows:

The salary and allowance expenditure or the year 2013-14 is Of the total expenditure on pay and allowances of Rs 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 Rs 44,000/ crores ( add 25% DA)

Add Pension amount of Rs  90,000/- crores

Add Defence employees salary  expenditure of Rs 75,000/- crores

So total expenditure is Rs 3,36,000 /- crores  

Add 14% increase in wage hike on 2.75 lakh crore for serving employees and 20% hike for pensioners . Add  HRA amount Rs 13,000/- crores .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 (2^nd possibility): 

Press Information Bureau Government of India Ministry of Finance statement .

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.

Pension.

  

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

    

3^rd Possibility Pay commission statement : 

Let us examine para no 3.66 of the 7^th 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 7^th CPC recommendations .

Multiply by 50lakhs CEG employees including Defence employees , Railways , Home, Postal etc. it works out to Rs 2.25 lakhs crores. So total expenditure on salary as on 1/1/2016 is at RS 2.25 lakhs crores. Add pension amount of Rs 1 lakh crores hence total expenditure is at Rs 3.25 lakh cores .

The 7^th 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 7^th 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 . Add  HRA amount Rs 13,000/- crores. 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.

4^th 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 75000/ crores

Total Expenditure on salary and allowances including pension amount is 3,09,000 crores.

 Add 14% increase in wage hike on 2.20 lakh crore for serving employees and 20% hike for pensioners  Add  HRA amount Rs 13,000/- crores  . Which works out to Rs 61,000/- 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 7^th CPC out of which 15,000/ crores is for Defence employees, Rs 15,000 crores by the Railway's . The 7^th CPC projections of 5.5 lakhs cores expenditure  is also wrong.   

The 7^th CPC recommendation's impact need not give jitters to the government because the rise in government wages will amount to only 0.4 per cent of GDP.

One more aspect is that technically, the recommendations of a Central Pay Commission are only for Central Government employees and States are not bound to follow suit. Indeed, up to the 1980s, States constituted their own Pay Commissions and prescribed their own pay scales, based upon their fiscal capacity.

       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