Eminent economist Suresh Tendulkar, after a study, had in 2011-12 declared a poverty line for India: Rs 27 per capita per day earning in rural areas and Rs 33 in urban -- levels at which getting two meals would be difficult. He had also put poverty at 29.5 per cent of the population.
In 2014, the Rangarajan Committee revisited the Tendulkar formula only after a massive public outcry erupted over the abnormally low poverty lines fixed by Tendulkar. The former RBI Chairman dismissed the Tendulkar methodology and concluded that the number of poor in India was much higher than 29.5 per cent and put it at 40 per cent. Further, Rangarajan suggested to the Government that those spending more than Rs 32 a day in rural areas and Rs 47 in urban do not fall under the poverty category.
Today, only two years later, the poverty line could not have touched the skies or fallen below the earth. So, even if the earning figure is doubled numerically at 54 and 66 rupees earning per day, respectively, in the rural and urban locations, anyone earning above that has to be considered ‘not poor’. If earning is higher in amount, it would indicate an ‘affluent’ status. Since this theory is accepted by the best economic brains including those of the World Bank, the servants appointed by the Government to work and solve problems of the masses must get somewhere around that figure to keep them functioning merrily. They should not have any valid reason to grumble. But shockingly, the Pay Commissions set up every decade is doing a mad job of making the one crore-odd Central Government employees filthy rich by Rangarajan and Tendulkar parameters. Some regional Governments, crazy to keep the servants happy, have readily agreed to implement the Pay Commission recommendations which are plain sacrilege and sin.
A mindless hike in salaries would upset the economy of a developing nation like India. The 23.5%-average hike in salaries, including arrears, of only one crore Central Government employees could push up the wage bill by a whopping Rs 1.14 lakh crore in 2016-17. Some consumer goods sectors might gain temporarily, but the capital goods sector will certainly stand to lose, making the net effect on the economy ghastly negative. The Government does not generate money. It is employees’ superb benign looking tricks to snatch wealth from others. So, when it increases spending by raising salary of the servants, it has to steal from somebody else, directly or indirectly. Peter has to rob to pay Paul. The aggregate shall, therefore, never rise.
It seems the perpetually ignored Indian Army will benefit the highest from the latest Pay Commission recommendations. The Cabinet is likely to approve a hike in its salary from Rs 21,000 to Rs 31,500.
The minimum pay of Rs 7,000 in the 6th Pay Commission has been raised to Rs 18,000 in the Seventh. A multiplication factor of 2.57 has been used in arriving at this minimum figure.
A maximum pay of Rs 2,25,000 per month for apex scale and Rs 2,50,000 for the Cabinet Secretary-level servants have been fixed as if money grows on wild trees in India. Furthermore, the gratuity ceiling has been doubled.
They have used a Fitment Formula:
Rs 5,200-20,200 band with grade pay of Rs 1,800 will be calculated by multiplying the factor of 2.57 with their existing basic pay (pay in pay band + grade pay).
A huge financial disaster is bound to happen, and the fiscal deficit would force cuts in social and capital expenditures. It will also impact tax policies.
The Pay Commission trick is now a perfect tool of vote bank politics. The commission’s proponents keep harping that the Government employees are beggars in terms of salary when compared with the corporate world. What they don’t reveal is that the Government employees get limitless intangible benefits including power and authority, access to top corporate power pockets; and the respect they command among the masses due to the general perception that Government employees can do irreparable damage, no matter how lowly in hierarchy if not kept in good humour. And humour means anything to keep them pleased. The Government employees avail fantastic PF contributions, housing and educational benefits which is only a dream in the private sector where ‘hire and fire’ fear is used as key to keep the employees slugging like donkeys to keep revenue soaring. The theory that highly-skilled individuals tend to move towards the private sector is not true at all. The big private corporates give nearly the same salary as the top Government officials but without any discretionary authority to experiment and learn from mistakes. They cannot drive away customers if mood is bad and still keep job like in the Government sector.
The whole world knows India is plagued with critical issues of abject poverty and lack of basic infrastructure. Still, the Government is diverting scarce financial resources to make its servants happy irrespective of quality of contribution. Most of the budgetary provisions are invested in revenue boosting rather than developing infrastructure and funding welfare schemes with prudent capital investment.
It is argued by the Pay Commission wizards that a better pay package attracts young talents to serve in Government departments and it boosts their morale, thereby preventing corruption, particularly bribery, which has never been true. Abuse of power has not diminished. Corruption cannot stop unless people’s experience is taken into account and employees are dismissed like in the corporate sector. Unethical Government officials are ruling the roost even today. Nepotism has not declined; bribery incidents are countless though very difficult to prove. Sting operations are not possible at all places.
For a developing and deficit-prone economy, the Seventh Pay Commission is just not affordable. Only three crore families will benefit beyond limits if the States accept them. The rest 30 crore families will keep suffering in poverty. Social strife is bound to become more intense given the incredible information technology being at hand -- the mobile phone, the Internet and the social media. Everyone knows everything.
A heavy burden to an already distressed budget would compel the Government to cut essential social sector spending and cause woes for a huge underprivileged class of people. The hopping-type DA along with other facilities and allowances commensurate with inflation are already given to the employees as entitlement as if prices do not rise for the masses.
The Government establishments have very poor, ineffective performance appraisal systems all over the country. As a result, all undeserving servants keep stealing scarce public money. Top-level decision makers have never thought of a good Performance Appraisal and Compensation Review Board to fix salary according to utility and productivity.
In Odisha, four lakh State Government employees, mostly useless, and over three lakh pensioners would benefit from the mad decision of accepting the Pay Commission recommendations. An official estimation has pegged the pay revision requirement at about Rs 5,500 crore annually. Currently, the State Government dishes out Rs 29,836 crore annually towards salaries and pensions.
The Odisha State Budget for 2015–2016 as presented by Finance Minister Pradip Kumar Amat in February 2015 stands at Rs 84,487.77 crore with a total revenue expenditure of Rs 65,838.99 crore. The Budget for 2016-17 has shown a fiscal deficit of Rs 14,533 crore or 3.79% of its gross State Domestic Product, which is higher than the mandated threshold of 3.5%, indicating the State's growing appetite for funding capital-intensive projects through indiscriminate debt routes. Odisha is still one of the poorest regions in India. The world-famous KBK project is still making news, though for all the wrong reasons. Naveen Patnaik needs to analyse in finer details to make out whether to give away scarce public money to many worthless servants. The masters are slowly getting to know the sinister designs. There could be trouble. The monopoly Government should not experiment on the wild fronts. Panchayat elections would bring in the same old victory. The poor, gullible masses who have kept the BJD afloat until now may turn ferocious if the ‘seventh pay’ package is given away to servants who do not perform too well. People have a right to assess performance of officials at their service and the findings be respected beyond doubt.
The great Naveen administration must not commit the ‘easier wrong than the harder right’. That may trigger the beginning of a painful end.
(The writer is a core member of Transparency International, Odisha)