The Hindu Business Line : Pay Commission: The challenges in an era of liberalisation

A Pay Commission is often not the culmination of difficulties, but their starting point. An unending exercise in lobbying and activist interventions by various coalition partners seems to be on the Government's agenda in the next few years. Hopefully, the Government chalked out guidelines to resolve the potential problems, says S. VENKITARAMANAN. The Government can attract the best and the brightest only if it competes adequately with the private sector in respect of emoluments and work conditions.

The Government has decided to set up a Pay Commission for its employees. This will be the second Pay Commission since liberalisation began in the 1990s. The Finance Minister, Mr P. Chidambaram, is a veteran, who has seen two Pay Commissions and will be mentoring a third one this time.

He was Minister for Personnel in the Rajiv Gandhi Government when he dealt with a pre-liberalisation Pay Commission's recommendations with redoubtable finesse. The conditions are, no doubt, difficult now. The recent State Bank of India strike is a portent of what trouble lies ahead for the Government in dealing with fractious issues of pay and allowances for its employees and facing friendly fire from coalition partners.

Periodic Pay Commissions have become a routine with Governments, both at the Centre and the States. Even with the formula of adjusting dearness allowance with the price index, anomalies creep in between different levels of employees in the same departments and across different departments.

Pay Commissions are expected to look into the issue of settling a reasonable wage, affordable to the Government and fair to employees. The problem is rendered complicated because of the question of relativities — first, among the employees in a department, and then among those in different departments.

Problem of relativity

The most common grouse in wage negotiations is not only the level of emoluments, which is of course a matter of concern, but the question of someone else getting more, although apparently less deserving. Horizontal relativity implies different categories of employees and similar job descriptions should draw equivalent emoluments.

Employees also wish to have upward movement in the hierarchy, however minor the increase in emoluments. This explains the number of different scales in Government service. Pay Commissions usually seek solutions to these problems and the cost to Government is kept small by making more scales than is justified by the nature of differences in work.

It is appropriate, at the outset, to set the problem in perspective. The over three million personnel in Central Government service at the end of March 31, 2006, are estimated to absorb emoluments of the order of Rs 30,000 crore, of a total Government expenditure of about Rs 5,00,000 crore. The expenditure on staff salaries of Government, although the pet target of critics, is not the straw that is breaking the proverbial camel's back.

Of course, care has to be taken lest the Centre ends up suffering the fate of some State Governments, where staff salaries absorb the bulk of revenues. The States have a different kind of problem, since they handle many cutting-edge responsibilities, such as education, health, and law and order. They have also to consider appointing separate Pay Commissions.

The Pay Commissions are usually guided by the principle of fair comparison with similar jobs of like complexity in the non-government sector. The question of competitive job opportunities is particularly serious in professions such as health services, where doctors can, if successful, command high emoluments outside the Government. The same holds good for law. Jobs in the judiciary should pay sufficiently high salaries to attract lawyers of calibre and competence.

While even the topmost judicial officer cannot be compensated at levels he could have earned in a successful legal practice, some balance has to be maintained.

Fixing emoluments

A vexed question relates to the fixation of emoluments of Central and All India Services. The I.A.S. is a special case because, by tradition, the IAS officer has been the leader of the administration in the Districts and the Government is vitally interested in recruiting competent persons to man this service. It enjoys a slightly higher career prospects than other services in the Government. The Government cannot, however, pay doctors and engineers lower salaries.

The question of paying Defence officers adequately is also difficult. It not only involves officers but, through relativity, other ranks whose number is large. Increasingly, Defence services are not proving attractive to young aspirants.

One of the dimensions that count in this is the level of emoluments. As with earlier Pay Commissions, the question of parity with civil services will engage the Government's attention. This is a complex issue.

One subject that the new Pay Commission has to take note of is remunerating our teachers, especially in engineering and medical colleges, adequately. The apparent failure of some of the American Universities is traced to the level of emoluments in comparison to that in industry. The situation in India is much worse. If the quality of teaching suffers, wherefrom will we sustain the supply of efficient engineers and scientists?

Anyway, the issue needs to be confronted and salaries restructured, keeping in mind the need to relate them to outcomes in terms of adequate output of training and research.

Globalisation issues

Another issue relates to the impact of globalisation, which has led to a boom in salaries, especially for executives in industry. This has repercussions in public sector industries, which have to keep up with their private sector counterparts, at least the domestic ones. This, in turn, impacts Government officers, who expect to be treated at least on par with PSU executives whom they, in theory, control.

It is in this context that we have to observe the paradox of fresh MBA graduates walking away with astronomical salaries that dwarf those of senior counterparts in Government. We would be living in a fool's paradise if we think that the Government can attract the best and the brightest if it does not compete adequately with the private sector in respect of emoluments and conditions of work.

A higher level of emoluments for the top levels in Government, that this implies, may mean that to maintain proper relativity, a cost increase will have to be provided for the support staff, who far outnumber the top echelons. The question of equity and higher cost resulting therefrom is preventing the adequate compensation of higher posts in Government.

A starting point

A Pay Commission is often not the culmination of difficulties, but a starting point. An unending exercise in lobbying and activist interventions by various coalition partners seems to be on the agenda of Government in the next few years. Interesting, if unedifying, seems to be the fate of Governments forming Pay Commissions.

The tasks before the coming Pay Commission are, indeed, challenging, especially when we consider the arduous task of balancing various relativities and considerations of equity in an age of globalisation.

Hopefully, the Government has engaged itself in sorting out various alternative guidelines to resolve the potential problems.

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