A K Bhattacharya: Fixing government pay

RAISINA HILL

Transparent pricing of perks and higher pay for officers are critical.

For civil servants, the Union Cabinet's approval of the proposal to set up the Sixth Pay Commission should have come as a big relief. It is true that the implementation of the Pay Commission's recommendations will add to the government's fiscal stress.

But ask any serving civil servant about this issue, he will argue with some conviction the need for a correction in the salary levels for at least all officer-grade government employees.

Indeed, the private sector job market has seen an increase in salaries in the past 10 years, which has left government salaries in many jobs way behind.

In order to attract fresh talent and retain those who wish to serve the government with some job satisfaction, it is necessary to bridge the huge gap between their salaries and those that comparable jobs in the private sector are now fetching.

Mind you, this is a problem that not all government jobs are suffering from. And this certainly complicates the issue. Government salaries at the lower-end of the jobs are still in tune with the market.

In fact, in some categories they are even better than what the private sector offers. Consider, for instance, how the private sector pays a school teacher, a clerk or a security guard and you will recognise that government salaries in these categories are fairly competitive.

The problem, however, is with salaries that the government pays to its Class-I officers and above, assuming that the government needs to keep them in employment. In these senior positions, the government presents itself as a poor paymaster compared to the private sector.

This has serious ramifications. Most civil service examinations held for professionals (including those for engineers, economists, geologists and so on) have ceased to attract the best talents available in the market.

There was a time when the best students of India's best universities would sit for examinations held by the Union Public Service Commission to recruit officers for the Indian Administrative Service (IAS) and the Indian Foreign Service (IFS).

These days, they shun these examinations and settle for more lucrative jobs in the private sector. The salary that these services offer (Rs 30,000 per month for the senior most civil servant at the end of one's career) is surely a major factor why these bright young men and women have turned away from government service.

So, what should the government do? One option is to raise the salary of officers by a margin that is certainly more than that is recommended for other categories. To that extent, the Sixth Pay Commission will go a long way in responding to the market reality.

But then there are other related issues. For instance, government salaries are structured in a non-transparent manner that does not always reflect the true market-related costs of the various perquisites that are offered to the employees. And this is particularly true for senior government officers.

Going by conservative estimates, the market rent of a senior official living in a government flat in New Delhi will be ranging between Rs 20,000 and Rs 75,000 per month. But the rent component of the salary of an officer, who lives in a government flat, is a fraction of this market rate.

Thus, the officer's gross salary (inclusive of the market value of the perquisites he gets) is actually much more than what is claimed by the government. In addition to increasing the officer's pay scales appropriately, the Sixth Pay Commission could, therefore, also consider realistically accounting for the market rent of the house which is offered to officers.

This will mean a substantial increase in the total emoluments that the government pays to the officers. And the officers will have a choice to either live in those government accommodations or opt out of them to receive the equivalent rental amount as part of their salaries.

The present system does not encourage officers and the system to recognise the actual value of the housing perquisites that the government offers them. Once these are linked to the market price, officers will start seeing them as real and valuable perquisites.

A fall-out of this measure will be a reduced demand for government housing as there will be a financial incentive to move out of these flats and either stay in one's own house or look for an accommodation that might result in net saving.

It will be naive to expect the Sixth Pay Commission to make any recommendation for a cut in the total number of government employees, since its members know very well the fate a similar recommendation made by the Fifth Pay Commission met with.

Perhaps, a more realistic stance would be to hope that the Sixth Pay Commission will make the government's pay structure more transparent, reflecting the actual market-related cost of all the perquisites offered to the employees. Housing is only one such example. There are many more such perquisites and these too need to be made more transparent.