The Cabinet’s decision to implement the Sixth Pay Commission’s recommendations has put pressure on state governments to revise salaries.
State governments usually adopt the central pay commission’s recommendations with some modifications or they form their own commissions. Either way, the central commission is seen as a benchmark by the state employee unions.
“This time around, state governments are better prepared and the impact will vary from state to state”, said DK Joshi, principal economist at CRISIL, a rating agency.
“At the aggregate level, the pressure on state finances will not be much”, he added, referring to the fact that states boast of a surplus if their revenues and expenditures are added.
A decade ago, the recommendations of the Fifth Pay Commission had adversely impacted the finances of states. The impact amounted to 0.4-0.6 per cent of gross domestic product.
The cumulative impact was 1.0 per cent over a two-year period, according to a paper presented by Rakesh Mohan, the deputy governor of the Reserve Bank of India.
Better-governed states like Karnataka which have a revenue surplus are in a position to absorb the additional expenditure, but states that have deficits will find it tough if they blindly implement the recommendations, says Joshi.
Maharashtra has already made a provision of Rs 7,000 crore for the current financial year, though the impact will be Rs 1,000 crore more than was budgeted in the first year, said a senior Maharashtra government official.
In West Bengal, where salaries are matched with the central pay scales, the impact is not known. But a state government official said, “We have been implementing the central government’s recommendations. In the last decade, this has plunged the state into crisis owing to non-availability of assistance from the Centre.”
In the past, the state did not pay the arrears by cash but credited the amount to the provident fund account so that the impact on its finances in the first year is reduced.
For Gujarat, the implementation of the recommendations in their entirety will result in an additional burden of Rs 1,700-1,800 crore.
Punjab has formed a similar committee. In the past, Punjab has bettered what the central government offered to its employees.
A Himachal Pradesh official said the state would implement the salary revision based on the recommendations of the Punjab Pay Commission.
(Makarand Gadgil from Mumbai, Ashish Amin from Ahmedabad, Rakesh Prakash from Bangalore and Pradeep Gooptu from Kolkata contributed to this article)
