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Tuesday, October 30, 2007

Opinion : Money for nothing?

The Sixth Pay Commission will raise government salaries. What about cutting the flab?

The Prime Minister was critical of the pay packages of corporate honchos some time ago and a debate on the subject was ignited.

Now there is news that the Sixth Pay Commission has something to say about pay structures in the government sector, with the thrust being unidirectional.

Quite naturally there is umbrage, given the mindset about the functioning of the public sector.

The main objective of a Pay Commission, broadly defined, is to revise the pay structure of government employees with every decade; and the justification, among other factors, is to establish some kind of parity with the private sector.

The impact of the past Pay Commissions has been manifold — they have reduced the incentive for the better candidates interested in joining the bureaucracy, made lower level government staff far better paid than their private sector counterparts, with no accountability, and put the central and state government finances in jeopardy.

The Fifth Pay Commission, which was implemented in 1997, recommended an increase in the total benefits for central government employees, which automatically translates into higher packages for state-level employees.

When salaries go up across the board, the first victim is the fiscal deficit, as expenditure goes up with no corresponding increase in revenue.

In the private sector, pay hikes are related to profit and performance, but when it comes to the government — since there are no profits and the performance system is cloudy — there is no way to quantify the net gain.

To reduce this burden, the Fifth Commission had sought to reduce the total size of the bureaucracy by 30 per cent over a ten-year period and to abolish all unfilled positions, numbering about 350,000, in 1996.