Private sector salaries for Govt employees?

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Keywords: Sixth Pay Commission, Face The Nation

A 40 per cent pay hike was recommended by the Sixth Pay Commission for all of the 45 lakh Government employees and a 100 per cent hike in the salaries of defence personnel with effect from January 1, 2006. This will entail a wage bill of Rs 30,000 crore for the government.

But is it a well-deserved payout to cope with the severe price rise or is it an election gimmick?

Should government employees receive the same salary as private sector employees?

These were the questions addressed on CNN-IBN's special primetime show Face the Nation on Monday, which was hosted by Sagarika Ghose.

The panel comprised of Director and Chief Executive ICRIER Dr Rajiv Kumar, Former Cabinet Secretary T S R Subramaniam, and COO Naukri.com Hitesh Oberoi.

Where is the Money?

The discussions began with a key question: where is the money going to come from?

Rajiv pointed out that the Finance Minister in his Budget speech had announced that he had left head room for about Rs 20,000 crore to take into account the Pay Commission recommendations.

And because it is not necessary for all of it to come out in the same year, there seems to fiscal space to accommodate the huge payout.

“The payment of this can be handled in different ways. It can be staggered, it can be given out in bonds," he said.

But the Fifth Pay Commission was called a fiscal catastrophe. The World Bank had called it the single-largest adverse shock to India's strained public finance. Now, without downsizing the government, it seems tough for the government to afford this massive wage bill.

Subramaniam pointed out the wage bill was much higher than Rs 30,000 crore. "In an election year, it has to spread to the states within six months. The total bill is going to be Rs 1,50,000 crore. The Government of India's taxes are buoyant and Chidambaram can afford it for the Government of India. Very few state governments will be able to afford it."

He also pointed out that Group C and D, clerks and chaprasis account for 92 per cent of the total. “Today, they are paid better than the market. It is only upper echelons, which are paid much lower than the market,” he added.

Subramaniam suggested using technology and downsizing Group C and D jobs to get results. He added that for a government servant, salary is only one element of the total package. “What matters is the working conditions, politics, tenure, the ability to do things at the right time at the right place. So we should not confuse administrative reforms with the Pay Commission report."

Private Vs Public

The private sector attracts good, talented people by paying high salaries. So must India pay out very high salaries in order to get the kind of governance we deserve?

“If you look at what used to happen 10-12 years ago, when government servants used to be paid as much or as well as the private sector. But today, it's very different. Today, private sector salaries are 10 times government salaries, especially at the top. So in India, people in the government are sort of overstaffed, overpaid and under worked at the bottom and understaffed, overworked and underpaid at the top. This has to change if you want the government to do well."

Many say it could mean the salaries are artificially compressed and there should be much better differentiation between top-level salaries and lower-level salaries.

But Subramaniam replied that it isn’t that the intake at the top is of inferior quality. He, however, conceded that because of the plethora of opportunities today, people have many options than earlier.

Subramaniam also cited job security as an attractive feature of government jobs. As for the salaries, he said, it was hard to match market rates anywhere in the world.