The Hindu Business Line : Sixth Pay Commission — Of pay parity and `unmentionable' salaries

Effective governance and delivery have become the cornerstones of governmental action, with increasing focus on performance. The basic question is not whether we need a Pay Commission or not but whether we are indeed moving to a responsive and efficient governance system.

THE clarion call for setting up the Sixth Central Pay Commission (SPC) has reached a crescendo, with the trade unions calling a nationwide strike on March 1.

The Fifth Pay Commission (FPC) award was implemented from January 1, 1996. As per the existing agreement with the staff side, a decennial Pay Commission is the practice.

Since the work of the Commission and final approval of its recommendations normally take more than two years a Commission is overdue. Unless the Government decides not to spend for a Commission whose recommendations normally implemented (basically the revised pay and perks structure) can be compressed into a set of simple formulae by a part-time Committee.

The hesitation of the Government, however, is understandable as it has not yet forgotten the fiscal burden that the FPC had imposed on both the Central and the Provincial Governments. In order to ward off another Pay Commission spectre the Government has merged 50 per cent DA (Dearness Allowance) with the basic pay for its employees.

It has also set up an Administrative Reforms Commission (ARC-2) which could come out with overarching recommendations on the principles of remunerations (incentive structure) for the civil services in making it responsive and efficient and improving governance.

This could then be used in the pay determination process — even in deciding against a Pay Commission-based approach in future.

Three sets of issues

The SPC issue may be, however, worth analysing on account of several reasons relating to the dynamics of remuneration and the increasing focus on the efficiency of governance.

The latter is very topical since the Government is determined to carry the fruits of development to the villages and the marginalised sections to achieve `inclusive' growth.

The first set of questions relates to maligning the FPC award for breaking the fiscal back of the States. Is it necessary that the Central Pay Award has to be implemented across the States (and local bodies too) verbatim?

Is there anything called ability to pay? Do all federal nations follow a central pay structure in its provinces?

Another set of issues relate to the ability of the Centre itself to pay handsome rewards to its re-burgeoning work force. Since the fiscal capacity of the centre is also limited, it invented a socialistic pay structure of paying everyone something and equating the pay of the hierarchy.

The third set is the monkey-peanut (M-P) syndrome, which is invariably invoked at the mere mention of Pay Commissions. Those who believe in the causality from M to P argue against anything more to the babus while the P to M school looks at the rising corporate pay packets (despite the bite of the FBT) and argue for a major rise in the salaries of the Mangers/Officers.

Equal pay for equal work, but..

The question of equal pay has to be seen in the context of the `workload' of the employees as well as the ability of the employer to pay.

Without that the demand will be invariably for equal pay right from local bodies to State Governments to the Central Government.

It was interesting to note the extent to which the principle of pay parity was followed when Super Bazaar, a cooperative provision store in Delhi, already in the red, implemented the FPC Award even before it was given to the Central Government employees, and sunk in the process. Are the responsibilities and the workload of a local body employee equal to that of a State Government employee, who is liable to serve anywhere in the State and to that of a Central Government employee whose liability it is to serve a country of continental dimension?

The cost of living of displacement from one's home is substantial as the transfer liability grows. So is the principle of ability to pay. Well, if any local body, State Government or Institution wants to pay more for its employees without jeopardising its fiscal health, why not?

The Central Pay Commission Award, which is meant for the Central Government employees, should at best become an indicator rather than a golden rule for parity across sectors, provinces and organisations. If the State Governments and other agencies have implemented the FPC award verbatim and got into a fiscal mess, it was because of poor management, not because of the award itself.

There were also arguments in favour that the generosity helped a `babu-led growth' in the face of an impending recession.

Ability to pay and pay parity

Ability to pay for all in equal measure is of course limited even for the Central Government. That is perhaps the reason why it maintained a socialistic principle of 10 peons equal to the Cabinet Secretary for a long time while determining their pay differentials!

Though the Fourth Pay Commission has slightly deviated from this ratio and made it 12:1, the FPC, which is credited with giving largesse to the employees, in fact brought it down to 11.7:1.

In an increasingly officer-oriented structure, this `inverted' incentive structure for managers and staff, goes against the norms prevailing in the corporate world, and can only play havoc with the system.

A classic example is the reported salary differential between the CMD of the SBI and the MD of ICICI Bank — Rs 6 lakh vis-à-vis Rs 150 lakh per annum.

Does it not violate the principle of equal pay for equal work?

Pay, perks and governance

Effective governance and delivery has become the corner stone of governmental action with increasing focus on performance.

If governance efficiency needs to be enhanced the philosophy has to shift from monkey to peanuts (M to P) to peanuts to monkey (P to M). Indeed if the causality is from M to P, why waste peanuts?

But also remember that 40 per cent of the top-level managers in the corporate sector de-monopolised in the last decade have migrated from the babudom and are producing immense results for those private corporates.

Similarly, the Singapore-Hong Kong experience with a substantially hiked pay and perquisite structure has been the main reason for their success in promoting responsive administration. Probably what is needed is grain-chaff management and deciding the pay and perquisites accordingly.

So the basic question is not whether we need a Pay Commission or not but whether we are indeed moving to a responsive and efficient governance system.

If this needs to be achieved, the age-old socialistic formula needs to be redefined and a shift in the mindset of M to P has to be generated. Otherwise, we will be maintaining status quo of a growing `reserve army' and converting more of them into M to munch peanuts with their `unmentionable' salaries.

(The author is Director (Development Policy), Planning Commission, New Delhi.)

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