The Cabinet may approve up to 20% increase in the basic pay of central government employees, compared to only 14.27% recommended by the 7th Pay Commission.
But the award will come only in January 2017 so that the exchequer takes a minimum hit on this year’s finances.
The Cabinet is likely to clear the 7th Pay Commission report and its recommendations on Wednesday.
The commission had recommended 23.55% increase in salaries, allowances and pensions that is estimated to put an additional burden of Rs 1.02 lakh crore, or nearly 0.7% of the GDP, on the exchequer.
The panel had suggested a 14.27% increase in the basic pay, which was the lowest in 70 years, as against the 6th Pay Commission’s recommendation of 20% hike. The minimum pay recommended by the 7th Pay Commission was Rs 18,000 per month, or more than double of the current Rs 7,000.
“Considering the tight fiscal position this year, the government may improve upon the pay commission’s recommendation for basic pay to 18% or at best 20%,” a senior official said.
He said the award will be implemented in January 1 next year and the mode of payment of arrears will be decided by the Cabinet. The government had allocated Rs 70,000 crore in the budget for 2015-16 towards the payment of the 7th Pay Commission award to the Centre’s 50 lakh employees and 58 lakh pensioners.
The implementation of the pay commission award was to take place on January 1, but the government set up a committee headed by Cabinet Secretary P K Sinha to process the recommendations. The committee took six months to give its report and it is now being translated into a note for the Cabinet’s nod.
If the Centre decides to give the panel’s award from January 2017, it will have to give arrears of one year. The official said the Cabinet will decide whether to give arrears for six months at one go or in instalments.
The recommendations are expected to increase urban consumption and demand that will in turn boost growth. But the flip side, analysts say, is a corresponding increase in inflation and government expenses.