7th Pay Commission: Cabinet likely to decide central government employees' allowances this week

Posted On Monday, 12 June 2017 11:47

moneyThe wait for an update on allowances is likely to be over soon as the Union Cabinet is expected to decide on the elusive matter the next time it meets on Wednesday. Finance Minister Arun Jaitley will table the proposals for the changes in allowance structure as per the 7th Pay Commission. The issue was not included in the agenda for the Cabinet meeting last week.

The Empowered Committee of Secretaries (E-CoS) has already submitted its report on allowance reforms to Jaitley. This committee of secretaries was formed to screen the recommendations by the Committee on Allowances led by Finance Secretary Ashok Lavasa.

E-CoS has taken a hard look at modifications in important allowances like House Rent Allowance (HRA), and payment of arrears against revised allowances. The Cabinet may consider higher HRA rates on basic pay demanded by the central government employees.

Central government employees want the rates to be retained at 30 per cent, 20 per cent and 10 per cent for Class X, Y and Z cities, even if they are not hiked. The Committee has capped HRA between 2 per cent and 27 per cent. Several reports suggest that the new allowances will be implemented from July.

Around 49 lakh central government employees have been expecting a hike in their paychecks for almost a year now. The government may compensate for this delay with higher HRA rates. Analysts, however, believe that an increase in allowances will fuel inflation owing to private expenditure.

Moreover, according to a Financial Express report, because of the delays in revised allowances distribution, the government has been able to save Rs 2,200 crore per month or Rs 40,000 crore cumulatively since January 1 last year.

The pay commission had recommended the abolition of or subsuming of allowances like acting, assisting cashier, cycle, condiment, flying squad, haircutting, rajbhasha, rajdhani, robe, shoe, shorthand, soap, spectacle, uniform, vigilance, and washing.

The Lavasa Committee was constituted in June last year after the government implemented the recommendations of the Pay Commission.

The Seventh Pay Commission had recommended abolishing 53 of the 196 allowances and subsuming 36 other allowances. It also recommended slashing the House Rent Allowance (HRA) -- for metros, the commission recommended bringing down the HRA from 30 per cent to 24 per cent.

The Seventh Pay Commission had recommended the rate of House Rent Allowance (HRA) be kept at 24 percent, 16 percent and 8 percent of the Basic Pay for Class X, Y and Z cities respectively.

Government employees protested the recommendations of the Seventh Pay Commission, following which the Narendra Modi-government formed a committee under the Finance Secretary to review the suggestions.

The Committee on Allowances was constituted in July and after an extended deadline was asked to submit its report to the government by February 22, 2017.

If the government implements pay commission recommendations on allowances, then as per estimates, the cost to the exchequer will be Rs 29,300 crores.

New source: businesstoday

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