NEW DELHI: With general elections just months away, the government has hiked salaries of over 50 lakh

government employees, including defence personnel, by a minimum of 21% with effect from January 1, 2006, liberally modifying the recommendations of the Sixth Pay Commission (SPC). The bonanza is expected to add Rs 17,798 crore per annum to the expenditure of the central government, 42% more than the hike recommended by the Sixth Pay Commission. Central government employees would get their revised salaries from September onwards. The government has to pay Rs 29,373 crore as arrears and this would be paid in two instalments, 40% this fiscal and 60% in 2009-10. Proposals to this effect were approved by the Union Cabinet, information & broadcasting minister PR Dasmunshi said on Thursday. The Cabinet has addressed, to a significant extent, the grievances of defence and police personnel with regard to the SPC recommendations. Speaking to reporters here after the Cabinet finalised the pay hikes, he said the minimum entry level salary of a government employee has been increased to Rs 7,000 against Rs 6,660 recommended by the Pay Commission. The current hike would push up the total emoluments of an employee at the lowest level beyond Rs 10,000 per month, including allowances. Central government staff would get their revised pay from September. The Cabinet has also cleared increase in the rate of annual increment from 2.5% to 3%, Mr Dasmunshi said. The additional burden on account of pay hikes would further push up the Centre’s fiscal deficit, which is widening due to increasing subsidies for fuel, fertilisers and food. The general apprehension is that it would also have an impact on inflation. The Pay Commission headed by Justice BN Srikrishna had submitted its report in March this year. For defence personnel, the Cabinet has approved at least three assured promotions under the modified assured career progression (ACP) scheme. This criteria will apply to civilian employees of defence forces as well. While civilians would get promotions after 10, 20 and 30 years of service, defence forces jawans would be promoted under ACP after 8, 16 and 24 years. Impact of revised pay scales on inflation has been factored in and there was no threat of missing the budget deficit targets, finance Minister P Chidambaram pointed out. The Prime Minister's Economic Advisory Council has sounded a word of caution, saying the increased wage bill could affect the government’s ability to meet deficit targets. “The impact of pay commission report on inflation was already factored in when the Cabinet cleared the report after the Committee of Secretaries suggested modifications on

the report,” Mr Chidambaram said, after the Cabinet meet. The finance minister was quick to add that the Budget deficit targets for 2008-09 will be adhered to. He said the burden on Union Budget will be Rs 15,717 crore. In addition, the Railway Budget for 2008-09 will bear an additional expenditure of Rs 6,414 crore, this is additional expenditure for six months plus 40% of the arrears. The Union Budget and the railway budget have a capacity to bear the burden on account of implementation of revised pay scale for central government employees, he said.

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