Poll bonus: 7th pay panel ahead of time

NEW DELHI: The government on Wednesday approved setting up of the 7th pay commission to review the salary and pension of more than 80 lakh central government employees and pensioners, in what is seen as a move to appease the sizeable chunk of government employees just ahead of crucial state polls and in the build-up to the 2014 Lok Sabha contest.

The announcement, timed to beat the code of conduct that will come into force after the announcement of state polls later this week, sparked off a war of words between the Congress and the main opposition BJP which said it had been brought forward with an eye on polls.

But the news was greeted with joy by thousands of government employees and pensioners who expect a handsome payout when the panel submits its report: something which seemed to validate the reason that the sop will go down well with the influential constituency of government workers in Delhi and other poll-bound states.

A pay commission is set up every 10 years to review the salary of central government employees to take into account the impact of inflation and cost of living.

The finance ministry said the average time taken by a pay commission has been about two years and taking this into account, the recommendations of the panel are likely to be implemented from January 2016.

The decision came a day after the petroleum minister put off a hike in diesel prices and was seen as an indication that the government, now firmly in poll mode, may soft-pedal on tough decisions until the Lok Sabha polls. It was par for course with another decision taken on Tuesday: Cabinet's approval for an ordinance meant to allow convicted MPs and MLAs to hold on to their seats. The measure seemed tailor made to buffer RJD chief Lalu Prasad against a possible adverse verdict in a trial court in Ranchi on September 30.

The clearance of the ordinance is being seen as Congress's desire to keep open its options for tie-ups in Bihar.

A finance ministry statement quoted finance minister P Chidambaram as saying that Prime Minister Manmohan Singh had approved the setting up of the 7th pay commission.

Congress general secretary in charge for communication Ajay Maken's lauded the announcement in his tweets, saying pay panel recommendations help government attract the best talent.

He justified the move. "Seventh pay commission of govt employees announced. Except for 6th pay commission, all pay commissions are set up in third year of a decade... The government should attract best of talent as its employees. Pay commissions help in attracting and also retaining best available talents," Maken said in his posts.

The announcement has ensured that 2016 will be a tough year not just for the Centre but for governments across the country. Implemetation of sixth pay commission recommendations in January 2006, which marked increase of up to 30% in some salary brackets, imposed a huge burden on public finances.

The implementation of the recommendations of a pay commission often sparks off demand from state government employees and workers in other government run entities which also takes a huge toll on the public finances of these governments.

Economists said that the panel's recommendations, whenever they are implemented, would pose a huge challenge to the government which is battling to restore the health of public finances against the backdrop of slowing economic growth.

The names of the chairperson and members as well as the terms of reference of the seventh pay commission will be finalized and announced shortly after consultation with major stakeholders.