Salaries and pensions for former and current central government employees will go up by nearly 24 percent retroactively from the start of this year.
In a bonanza for over 1 crore government employees and pensioners, the Cabinet on Wednesday approved implementation of the 7th Pay Commission, which had recommended an overall hike of 23.5%.
"Congratulations to central government officers, employees & pensioners on a historic rise in their salary & allowances through the 7th CPC (Central Pay Commission)," Finance Minister Arun Jaitley tweeted shortly after the meeting of the Cabinet headed by Prime Minister Narendra Modi.
Later speaking to the media, Jaitley said that recommendations of the Pay Commission will be paid from January 1 and arrears will also be paid this year. The total burden to the exchequer will be Rs 102,100 crore. Jaitley said that government salaries are now distinctively higher than that of the private sectors and hence there shouldn't be any protest. In this way, Jaitley has brushed aside protest of many unhappy workers who have threatened to go on strike from July 11. He said government has by and large accepted the recommendations of the pay panel and said that various expert groups will decide on allowances.
After implementation of the recommendations, minimum pay will be Rs 18,000 against the existing Rs 7,000. Jaitley also said that fitment factor of 2.57 approved for revising pay of all employees uniformly across all levels. The pay hike will benefit 47 lakh government employees and 53 lakh pensioners. Jaitley pointed out that recommendation of deduction for group insurance from salary as recommended by the Pay Commission hasn't been approved. Jaitley said that implementation of the pay commission will increase demand and savings hence positively impacting the economy. Finance Minister said that existing rates of monthly contribution towards Group Insurance will continue. He said that govt has tried to ensure salaries are respectable in order to attract the best talents. The minimum pension has also been hiked from Rs 3,500 to Rs 9,000. Gratuity ceiling doubled to Rs 20 lakh and housing loan allowance hiked from Rs 7.5 lakh to Rs 25 lakh, said Finance Secretary Ashok Lavasa.
The pay panel had in November last year recommended 14.27% hike in basic pay at junior levels, the lowest in 70 years. The previous 6th Pay Commission had recommended a 20% hike which the government doubled while implementing it in 2008. After considering the increase proposed in allowances, the hike in remunerations comes to 23.55%. The 23.55% overall hike in salaries, allowances and pension would entail an additional burden of Rs 1.02 lakh crore or nearly 0.7% of the GDP, to the exchequer. The entry level pay has been recommended to be raised to Rs 18,000 per month from current Rs 7,000 while the maximum pay, drawn by the Cabinet Secretary, has been fixed at Rs 2.5 lakh per month from current Rs 90,000.