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Sunday, April 6, 2008

Of salary hikes and serious change

While presenting the Sixth Pay Commission report to the finance minister, Justice Srikrishna is reported to have remarked that his recommendations would make everyone equally unhappy. This is almost like when Henry Kissinger described the criteria of a successful international negotiation to be one which left all negotiating parties equally unhappy with the outcome.

The mandate of the Sixth Pay Commission was seeking recommendations beyond financial issues on “transforming central government organisation into modern, professional and citizen friendly entities that are dedicated to the service of the people.”

As expected, the recommendations have evoked contradictory responses — on whether it would make government jobs more attractive, lure better talent, reduce corruption, create incentives for improved productivity, retain the delicate equilibrium between different categories of employees, say the police and the armed forces.

Let me comment on four issues.

• First, on creating a competitive environment to attract talent. Is this really a losing game and somewhat like Alice in Wonderland in seeking to run faster and faster to be in the same place? The recommendations giving significantly higher emoluments to regulators, encouraging contractual appointment and delinking professionals with domain knowledge from the prescribed pay scale have multiple positives. No doubt, transparency and adhering to the prescribed recruitment process alter existing paradigms for such appointments and a lot would depend on how truthfully they are implemented. Based on current trends, the Indian economy is likely to grow at eight per cent in the medium term and salaries in the private sector will always outpace what government can seek to match. However, all over the world public service and participation in the decision making process which impacts our lives is compensation enough for the large differential between pubic and private emoluments. That may not therefore be a losing game.

• Second, consultations with state governments should have been mandatory. It is a fiction that since these recommendations apply only to the central government, consulting states was not considered necessary. Based on past experience, Pay Commission recommendations have invariably generated enough pressures on all state governments to undertake similar revisions. The regrettable timing of both the Fifth and Sixth Pay Commission recommendations on the eve of impending general election makes this more inevitable. Political will is always malleable in election time. Some of the most thorny issues in administrative reform, such as delayering of services provision (health, education, rural infrastructure) necessarily require states’ engagement.

• Third, an important recommendation relates to the introduction of a Performance Related Incentive Scheme (PRIS) under which employees, to be eligible for pecuniary remuneration over and above the pay, should be encouraged to voluntarily accept a performance related incentive scheme replacing the existing ad-hoc bonus. The resulting efficiency gain is expected to make this financially neutral.

A model to implement this with transparency has been suggested by IIM-Ahmedabad. The model is, however, highly theoretical and would require much greater refinement and adjustments to suit varied local conditions. It can result in further complication of the administrative structure if implementation is faulty and mired in controversy. Devising and applying easily comprehensible performance criteria necessitates consultation with multiplicity of agencies and organisations administering these programmes. It remains a long haul.

• Fourth, the compression of 35 scales to 20, coupled with number of other suggestions are designed to encourage greater delegation and delayering of decision making in achieving quantifiable and concrete results.

Delegation of financial and administrative authority is a worthwhile but daunting goal. Regrettably, many states are yet to implement even the constitutionally mandated delegation of financial and administrative powers to local bodies and Panchayati Raj institutions.

The declining efficiency of public delivery system is causing concern at a time when public outlays are in fact rising substantially. Accountability for project delays with huge cost and time over runs remain problematic. Fixing accountability is always lost in the opaqueness of the multiplicity of institutions and organisations.

Pay commissions in the past have never failed to suggest administrative reforms along with better emoluments. The Fifth Pay Commission suggested a major reduction in the number of government employees alongwith improved emoluments. The pay cheques were happily handed out but everyone has forgotten about the attrition in numbers. This pay commission, like its predecessors, also expects “its recommendations to be treated as an organic whole as partial implementation will bring in several anomalies and inconsistencies.”

There may be political will to handout bigger cheques. Would there be the political sagacity to tackle the non financial recommendation which in fact have a more abiding impact?

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