Government disservice

XLRI, Jamshedpur is working out a very interesting scenario. A government employee gets various allowances and benefits like housing, transport facilities, telephones, free passes/ LTC, bungalow peons or orderlies, pension, free rations (in armed forces) and job security. XLRI is working out the cost to the government of these tangible and intangible benefits for the Commission to compare that with the private sector standards.

Why is this necessary? In 1956, when the First Pay Commission was set up, the difference in wages between the top level of the bureaucracy and the junior most peon was 12:1. By 2003-04 when the government conducted its latest pay analysis that difference had shrunk to 1.5:1.

The pay commissions, set up every ten years, have impacted the economy in three ways. They have reduced the incentive for the better students to join the civil service. They have made the lower level government staff far better paid than their private sector counterpart, with far less accountability. They have also wrecked the shape of central and state government finances.

Just examine the incentive structure for a bright university pass out were she to opt for the civil service today. She would march into one of the bhawans with a gross salary of Rs 16,000 per month and walk out at the age of 60 with a package of about Rs 70,000 per month. She would need the pension of 50 per cent of her last paid salary as her savings would never stretch enough to yield any decent post retirement income. To make it up, typically in her most dynamic years, she may be one of the 10 per cent from her batch that would stay away or quit from active government service. Just check the postings of civil service recruits between 1978 and 1985 and it would be apparent.

But her peon would do much better. In the private sector for instance, a huge percentage of clerical employees qualify for bonus payments, when basic pay less than Rs 3,500 per month. But hardly any non-executive government employee would qualify, as they all draw a basic salary of more than Rs 3,500. (Jettison the question of whether a government employee should get a bonus.)

Since the terms of service of a government employee is also secured by Article 311 of the Constitution, the lower grade staff in government service, then, are in an aspirational job. And political parties promise to expand recruitment in government beyond the current 3.3 million civil employees (plus another 2 million in armed forces). They are also the numbers who swarm the canteens, the corridors, and the Delhi roundabouts during office hours.

Again pay department statistics show that 70 per cent of central government employees are lower grade staff. Since half of the central government employees belong to the railways, this means that group B and A officials number only about half a million. They are the ones who work the on government policies that impact on our lives. As their salary package is shoddy, they are also easy targets for those who want to swing government orders for their benefit.

But each pay commission has bowed before the majority, ignoring the differential needs of this group. To reconcile the contradictory needs, the Fifth Pay Commission created India’s biggest ever fiscal crisis. The wages and pension bill for the Centre almost doubled from Rs 218 billion to Rs 437 billion in three years. For the states, the tab shot up to Rs 890 billion from Rs 515 billion, over a slightly longer period. This has widened the difference between the non-executive grade government staff and their private sector counterparts, but has not clipped the gap between the starting pay of a civil servant and her batch mate in a private sector company. It has widened.

Incidentally improving the pay package is not the raison d’etre of Justice B.N. Srikrishna’s team. Their terms of reference say the recommendations should ‘harmonise the functioning of the central government organisations with the demands of the emerging global economic scenario”. The Fifth Pay Commision attempted some of those, like cutting the staff strength by one third, reducing the number of holidays and clubbing them together. The active unions of the government employees have, of course, effectively buried them. That work will be a very key component, to “transform the central government organisations into modern, professional and citizen-friendly entities that are dedicated to the service of the people”.