The move is being seen as tag “Big Thank You” by the Prime Minister to the large number of government employees who voted for him in 2014 Lok Sabha polls.
In the last two Budgets the Centre had not come forth with any major relief for Central government employees but had said that they would get their grand package at an appropriate time.
In the both budgets of the Modi government, no tax relief was announced for Central government employees, which was their long pending demand. On Wednesday that package was delivered.
With assembly elections in Uttar Pradesh, Punjab, Uttarkhand, Goa scheduled to be held in early 2017, the approval of 7th CPC is aimed at placating millions of government employees as the decision would benefit 47 lakh serving employees and 53 lakh pensioners, of which 14 lakh employees and 18 lakh pensioners are from the defence forces.
While announcing the decision, Finance Minister Arun Jaitley said, “The recommendations will be implemented from January 1, 2016 and arrears will paid this year itself. Entry level salary for government staff will be Rs 18,000 against the existing Rs 7,000 per month, whereas the highest level will be Rs 2.50 lakh against the existing Rs 90,000.”
“Based on minimum pay, fitment factor of 2.57 has been approved for revising pay of all employees uniformly across all levels. The total financial burden in the current financial year due to the implementation of the CPC is likely to be Rs 1.02 lakh crore, which was Rs 40,000 crore and Rs 17,000 crore during 6th and 5th CPC respectively,” Jaitley said.
Taking on the ousted UPA government, Jaitley said, “The recommendations of 5th CPC was approved in 19 months, while 6th CPC report was approved in 32 months, but 7th CPC has been approved in least time of just seven months after the report was submitted in November 2015.”
The last major hike in 2008 saw an average raise of nearly 50 per cent. Even though, the increments are considerably smaller than past increases, but it will cost the government about Rs 1 lakh crore every year.
Minimum pension will now become Rs 9,000 against the existing monthly pension of Rs 3,500. The rate of annual increment has been retained at 3 per cent, while gratuity ceiling has been enhanced from Rs 10 to 20 lakh.
The ceiling on gratuity will increase by 25 per cent whenever DA rises by 50 per cent. Rates of Military Service Pay have also been revised to Rs 3,600, Rs 5,200, Rs 10,800 and Rs 15,500 a month for various categories of defence personnel.
Explaining on allowances, Jaitley said, “The recommendations on allowances will be referred to a committee headed by finance secretary to examine it, but in the meantime, the existing allowances will continue.”
The government is hoping that the higher salaries spur consumer spending which in turn could trigger economic growth. However, some experts believe that the additional cash in the market could fuel inflation. To keep a check on price rise driven by greater liquidity in the market, the government plans to keep a close eye on the market.
The Central government employees unions have, however, expressed their dissatisfaction over the decision. Talking to Millennium Post, Bharatiya Mazdoor Sangh general secretary Brajesh Upadhay said, “There is nothing to cherish as government has humiliated us by approving less-than-expected pay rise.”