Centre can still save Rs 4,586 crore

SIXTH PAY COMMISSION REPORT

Even as it has recommended an average 40 per cent hike in government salaries, the Sixth Central Pay Commission has said that various measures it has suggested will save the central government Rs 4,586 crore annually. The cmmission has pegged the gross financial implication at Rs 12,561 crore annually.

The commission said the savings would be on account of lateral shift of defence personnel to central police organisations, change in mode of payment of commutation and limiting the government's role on granting loans and interest subsidy to government employees. Its recommendations will have a net financial implication of Rs 7,975 crore per annum.

Lateral movement of defence personnel in central paramilitary forces will result in a saving of Rs 1,800 crore, out of which Rs 600 crore will be on account of pension, Rs 1,100 crore on commutation of pension and Rs 100 crore on training and recruitment.

The commission expects a savings of Rs 1,000 crore and Rs 1,344 crore on account of rectification of commutation of pension formula and revised scheme for payment of pension commutation, respectively. The revised scheme for payment of advances will result in a saving of Rs 442 crore.

However, the commission said no saving might accrue in the implementation year, likely to be 2008.

Out of the Rs 12,561-crore expenditure for 2008-09, Rs 9,242 crore will be on account of the central budget and Rs 3,319 crore on account of the railway budget.

As the revised pay scale will be implemented with effect from January 1, 2006, an additional one-time burden of Rs 18,060 crore will account for pay arrears. These may be disbursed over a period of two years.

If the government decides to split the arrears into two installments payable in two years, the central government may have to spend be Rs 6,321 crore while the railways may have to spend Rs 2,709 crore in 2008-09.

With the tax-GDP ratio set to increase from 11.4 per cent in 2006-07 to 13.9 per cent in 2011-12, the Commission is of the view that "the central government should be in a position to meet the additional expenditure consequent to the cmmission's recommendations".