Value for money

Perhaps the most dramatic statement made by Prime Minister Manmohan Singh during his press conference on Tuesday was that his government had decided to set up the Sixth Pay Commission, to review the salary structure for central government employees. The central government apparently believes that the overall fiscal situation has improved to the point where increasing salaries seems a sensible thing to do. That it may well be, provided that certain, rather stringent, conditions are met. The Fifth Pay Commission had recommended significant increases in compensation along with significant reductions in the workforce to offset the increases. As is well-known, the government of the day accepted the former but rejected the latter. If a similar attitude is taken towards the work to be done by the Sixth Pay Commission, renewed fiscal stress will be the certain outcome.

Having made the decision to set up the Commission, the government should make full use of the opportunity it provides to effect a thorough revamp of organisational structures and incentive systems within government. No solution to the crisis in delivery of public services is going to be complete or effective if these basic issues are not addressed, and a salary restructuring provides the best opportunity to deal with the situation. To begin with, at the macro level, three critical issues need to be dealt with. First, the government salary structure is inverted in relation to the market. Top-level compensation is below what the market offers, even when the numerous (untaxed) fringe benefits are accounted for. Bottom-level compensation for the various manual and clerical functions, many of which have in any case been made redundant by technology, is above what the market offers. In order to attract reasonable talent at all levels, there has to be a greater alignment with the market.

Second, and related to this, is the issue of tenure and job security. It is outrageous in this day and age that top echelons of government are monopolised by people who did well in a screening process 30 years before. Surely, as the environment changes and new, complex challenges emerge, the interests of good governance are best served by getting the best available people, from whatever position they happen to be in. Along with market alignment, lateral entry at the highest levels must become the rule rather than the exception it is today. Third, the inability to deliver must be firmly and transparently dealt with, using measures ranging from financial penalties to termination of employment. Punitive transfers and postings are all very well, but why should the taxpayer be forced to pay this price for incompetence or malfeasance?

In its essence, good governance involves providing value for money to citizens for the taxes they pay; in turn, this means getting it from all public servants. A new Pay Commission with a mandate to go beyond mere salary revisions and examine the whole issue in the context of improving the quality and efficiency of public service delivery could provide significant momentum to the process. If the Prime Minister is unsure of his government's political will and ability to implement the radical measures that would come from a commission so empowered, his best bet would be to stall the initiative. Unfortunately, having set it in motion in a public forum, that may prove impossible.