The great divide : Injustice from Justice Sreekrishna

The great divide, and the denial of justice.

Our society gets divided on many forms and accounts. The poor and the rich, the literate and the illiterate, abled and the disabled, … and the list of ‘divide’ is very long. Divisions of all sorts There is a continuous effort by our ‘masters of the society” to eradicate such divides, and bring in equality and justice. While many such divisions are still prevalent in our society, divisions of many more are being created. New divisions happen (or created) on many frontiers of our society and life. New cases of “ ‘have’s and ‘have not’s “ are still being created (not just happens).

One such division, recently created, is among the Central Govt employees and the pensioners. The Sixth Central Pay Commission ( headed by Justice Sreekrishna) is the creator of this divide. The Government, however, has vetted the division. However, this not being a National issue, has not surfaced out appropriately.

The division, concerning the Central Govt employees (both present and former), is not affecting the present employees (gainers), but affects the former employees (pensioners) who are the losers. This divide is certainly a painful one for the pensioners, a very small fraction of our society.

Though the present employees are ‘over-joyed’ over the 6PC recommendations and its implementation (with more icing by the Government ), some of the pensioners are very sad about it (although there is an increase in the monthly pension). The reason for this divide is a discrimination towards the pensioners, based on a date.

1 January 2006, the effective date of implementation of the 6PC recommendations, is the unfortunate day for many of the pensioners. The division is among employees retired on or before 31-12-2005 and the employees retired or serving on or after 1-1-2006. The midnight on 31 Dec 2005 is the “Berlin wall” for these two “Classes of employees”. Retirees on or before 31-12-2005 are the have-nots, while all others are haves.

In one of my earlier posts, I brought an example of the division. To remind you of the ‘great difference’, look at the following. There’s many unjustifiable differences, and I am quoting only just one among them

A person retiring on 31-12-2005 gets an amount of 3.5 Lakhs as the Gratuity. But, a person retiring on the next day (ie. 1-1-2006) walks away happily with 10 Lakhs. I am sure that the 6PC and the Govt authorities understand very well that the amount of Gratuity is a lumpsum amount paid to the retired person (as a gratitude !) for making a settlement/ base for his retired (old age) life. Thanks to our system, for giving a monthly pension for the maintenance of the retired’s old age life (though inadequate to maintain the life standards ). The person leaving on 31-12-2005 settles his life with 3.5, and the other person leaving after the midnight of that day settles with 10 Lakhs. The difference is 3 times ! This is certainly a great divide and is not justifiable.

Central Govt rules stipulate (that’s what I understand) that a Commission be appointed for review of the pay and related aspects of the Central Govt employees, once in 10 years. Since the 5^th PC recommendations were made effective on 1-1-1996, the 6^th PC made 1-1-2006 as its “effective date” for implementation. That’s fine, but that’s not meant to be the base for a justifiable structure of pay and related matters. Cost of living or any other economic parameter did not jump 3 times on that ‘sacred’ day.

A revision of pay structure (as given now) can be created by any babu at the Central secretariat. But, that’s not what was expected of the Commission, its Chairman, and the Govt. The Commission was expected to consider the issue and requirements in its global nature and on a 360^O perspective. Had it been on such an angle, a more equitable and justifiable outcome would have come. I think, the Commission had an easy task, by taking it too easy. Was the objective of the task only to frame new scales of pay for the present employees ? Only to make them happy ? Or to compute on a multiplication factor to compute a slightly higher Pension?

On the implementation front, the Govt authorities haven’t put their mind into the social implications of implementing such recommendations. Probably, they did only a mathematical exercise to compute the total financial burden on the national exchequer.

6PC and the Govt authorities, I wish, should have had a more logical look at the social aspects of the implementation of the 6PC recommendations.

What I am pointing out here is only an element of the discriminatory nature of the 6PC aspects. Many more things are in the field. This is evident from the fact that our Armed Forces have NOT accepted the implementation of these recommendations. This too reinforces the fact that Justice Sreekrishna did not do justice to many. That includes our Armed Forces and the poor pensioners.

In my view, the above ‘sacred day’ – 1 Jan 2006 – has no relevance at all. It did the division, and that’s all. This is not justifiable. Why should all the things be applicable from this sacred day only ? What’s wrong if it had a backward date and applicability. That doesn’t mean that I am suggesting for my convenient date for applicability/ implementation. Let the date of implementation be 1 Jan 2006. But it’s applicability, in a proper format, be made backward too. To suggest an example, in the case of the Gratuity, let a formula be made with backward applicability (for the last 10 years). Let the pensioners (before 1-1-06) get a modified Gratuity = 10 lakhs minus ((2006 minus year of retirement) X 10% of 10 lakhs). {This is backwardly tapering down at 10% per year, for 10 years }. In the case of Commutation of pension too, there’s a big discrimination. That too should be appropriately worked out (on such a backward tapering principle) and justified.

I am aware that there would be an additional load on the Govt budget, but that's too small for the Govt to bear. Remember, the Govt could easily write off 75,000 crores towards the agricultural loans (which in fact did not reach the real suffering farmers ). Many more crores have been pumped recently into the stock market system, in an effort to save a minor fraction of our population. The additional burden that would bring in by implementing a backward tapering formula, for the pensioners, is not a burden at all, for the Govt. In fact, that would be a case of justice done.

My attempt here is not to say that 6PC and the Govt did all blunders. They did excellent work and recommendations on many aspects. To cite an example, Govt implemented the ‘One Rank One Pension” principle. By the way, this is an excellent case of doing some justice to all the pensioners.

My attempt here is to invite the attention of ALL related personnel and the Govt to relook into the ‘unjustified’ aspects of this issue.

Will someone put their thoughts on this ? I hope some one does.. the authorities.. the guards of our society …. . and resolve the unjustifiable divisions.

May God Bless all.

Unfortunate retirements - Just over a day

What happened on 31 December 2005 ? Yeah.. something very important has happened.

1 January 2006 was all the way different from its previous day... Atleast for all Central Government employees. Being an employee on 1 Jan 2006 makes a lot of difference from having been an employee on or before 31 Dec 2005 ( and not being an employee on 1Jan 2006).

Let me put here, my personal views, on the 'injustice' implemented by our Government.

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The Sixth Pay Commission has been so generous to the Central Government Employees. But, equally too, they are so cruel to some of the pensioners.

The retirement benefits ( the amount of money, lumpsum) given to a retiring employee is meant to build a ‘retired life’ for him and his family. The pension is for the maintenance of his and his family’s life. These are the benefits obtained for burning their lives (the whole life) for the Government (society).

An employee retired on 31 December 2005 is not qualified for the retirement benefits as announced by 6PC (although there is a very small increase in the monthly pension, on the principle of ‘one rank one pension’). Had he retired on the next day, 1 January 2006, things would have been very different. He would have got the new terms of retirement, which is far higher than those applicable for 31 December 2005. A day makes so much of difference. The difference is so large that he feels very miserable, when he think of this ONE DAY. People who retired around that period – in 2005- feel so bad, miserable and dejected; just over a few day’s or week’s difference.

The retirement benefits of two persons of the same position and pay ( one retired on 31Dec 2005 and the other on 1Jan 2006) should be almost equal ( atleast comparable in the amount of terminal benefits and subsequent monthly pension). That’s natural justice, I believe. To give an example, when my 010106 friend got 10 lakhs as his gratuity, another one (311205) got just 3.5. This is certainly not fair. It’s not justice.

But the 6PC and the Government has not looked at the implementation in this angle. This is cruel and injustice. I strongly feel that the Government should normalize this huge difference caused by that milestone day. The improved retirement benefits and pension should be applicable to those retired earlier too (pre 2006). The applicability of the benefits may be made in a tapering method. May be, 10% less for every year preceding 2006 (eg. For persons retired in 2005, the terminal benefits may be 90% of what a person retiring on 1Jan 2006 gets). This would atleast bring in some justice to those unfortunate ones.The financial load on the Government by implementing such a justice would not be very high.

I wish, our Government would consider the plight of the retired people, and do a normalization of terminal benefits and pension.

The bulging purses

The bulging purses : The purses of over 5 million Central Government employees are quite heavy and bulging out now. There’s lot of money with them, with the wind fall gains following the 6PC implementation.
As in last time (in 1997), most of these huge amounts (received as arrears) will land up in the consumer durables market. That’s exactly why most of those companies are vigorously in the market with attractive schemes and offers ( Navaraathri is just another added reason).

Experts on Personal Finances have a piece of advice to these new millionaires - “Caution …. before spending all your money on cars, TVs, and PCs; keep in mind the future value of money”.
Here are the important DOs and DON’Ts, (on how to spend your arrear amounts), these Experts suggest.

1. Keep 3 months (household) expenses aside for contingencies.
2. Pay-off Credit Card dues, and personal loans (if any, in full).
3. Prepay Home Loans (if any), as much as possible.
4. Take a Medical Insurance (if not covered by other schemes).
5. Make a Mutual Fund deposit (may consider the Tax gains too).
6. Please don't forget a sacred act .. CHARITY. Contribute your might.

DO NOT park your money in Fixed deposits (or in SB accounts) , as you will most probably end up in a loss, accounting for inflation.

Regarding the increased monthly salary, experts suggest that only a part of your raise be used for household expenses. The balance amount (of your increased salary) should be put in a recurring deposit or SIP into a suitable Mutual Fund.

Retired Employees also would get their revised increased pension. The arrears and the increased monthly pension should be dealt carefully and wisely ( Remember, hard times are ahead, it looks ). You can’t expect any raise in your pension , in the near future (for another 10 years !).
Retired persons should consider regular expenses (going up always) , contingencies (any time guest, uninvited !) and growth of capital (to beat inflation).

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Cost to Government : 4 times the salary on paper

I have here an article taken from indiainfo.com, regarding the Sixth Pay Commission and a study on 'Cost to Government' by XLRI, Jamshedpur.

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Cost to Government : 4 times the salary on paper.

A bungalow in Lutyens' Delhi is a dream for most corporate honchos. Not only because of the prohibitive costs but also because there's simply no space available in the heart of 'official' India. So try putting a cost to staying in a house on, say, Shahjahan Road, and the value of 'intangibles' that automatically come with a government job becomes strikingly real.

As a first, the Sixth Central Pay Commission asked XLRI Jamshedpur to do a comprehensive study of 'Cost to Government', a near-equivalent of 'Cost to Company' (CTC), a concept that caught the fancy of a globalizing India Inc after the mid-1990s.

The results of the XLRI study clearly indicated that a simplistic, straitjacketed comparison between government and private sector compensation packages was difficult because of all the invisible benefits that follow when a person works for the state.

The show-stealer, if at all the two worlds were to be compared, was job security or the no-easy-exit rule followed by the government against the hire-and-fire policy of the private sector where even the value of the employee is liable to change every year.

The XLRI team of Professors R K Premarajan, E M Rao and L Gurunathan felt the study would help "clear the employees' misconceptions about the perceived external inequity". The team circulated questionnaires, held discussions with officials and made an exhaustive study of PSUs as well as the private sector before arriving at the conclusions.

The CTG — or total out-go of the government per civilian employee — works out to more than three times the salary s/he gets. It gets better in the railways, possibly the world's biggest single employer, where each staffer's CTG is 3.75 times the salary. In the Armed Forces, it climbs to four times.

"Pay is a relative concept and how well an organization is paying depends to a large extent on the angle of vision of the vision of the employees and the selective comparisons they make," says the report, indicating that a government job should be understood in its entirety and knee-jerk reactions are often partial and uninformed.

The study puts 'returns' from a job into two categories. The first is 'transactional returns', which are perennial and include basic pay, DA, house rent allowance, conveyance and a whole lot of intangibles — housing, free passes, orderlies and telephones, among others. Then come 'relational returns' that refer to benefits or values like self-esteem, self-satisfaction, job challenge, working for a nobler cause, serving the nation and, of course, job security.

"The highest payer may offer little or no relational returns," says the study. Work-life imbalances are nothing new in the private sector where the focus is only on task accomplishment. CTC doesn't take into account the negative aspects of a job and the concept often suffers from one-sided vision. According to the professors, an inflation-indexed pension, along with gratuity and leave encashment benefits, constitutes the biggest draw for a government job. A sizeable 40% of the pension can be commuted and restored to the employee after 15 years of retirement, when s/he would probably need the money most.

There's also house building advance, up to a maximum of Rs 7.5 lakh, where the principal amount can be paid back in 180 EMIs, followed by simple interest payable in 60 more EMIs. This is a benefit any private sector employee would envy.

Healthcare is another perk, with the government incurring Rs 538 per employee every month for 33 years. And, this does not change with change of employer, as is often the case in the private sector. The group insurance component is also attractive. For a cover of Rs 1.2 lakh, the market rate premium would be Rs 249 per month but a government employee has to pay only Rs 36 and the rest (Rs 217) is part of CTG. A pre-pay commission estimate suggests that in a metro like Delhi, the government's cost on a senior officer would be to the tune of Rs 62,385 every month, although his take-home salary is much lower.

Family passes in the railways is a benefit most folks covet. A senior railway official uses 9,364 passes during his 33-year career, each trip averaging 1,000 km. The facility continues post-retirement. A similar lifelong benefit enjoyed by defense personnel is that of tax-free canteens, besides 90 days' annual leave, above the normal 60 days for others.

The main reason why companies resort to CTC calculations, the study points out, is that a consolidated amount would force them to pay 12% provident fund. The employees' need to have more cash in hand and scope for tax concessions through allowances are the other reasons. These factors, however, do not drive the government because it is not constrained by demand-supply considerations.

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Sixth Pay Commission Recommendations and Implementation

6PC recommendations and implementation.

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The sixth pay commission recommendations have been implemented with some positive (for the employees) revisions. The average pay hike (all included) is 21 %, and with effect from 1-1-2006. The pay arrears also are being paid (40% this year and 60% next year). Over 5 million government employees are benefited by this.

Reports say that , ten years ago, when the fifth pay commission was implemented, it gave rise to a heavy debt burden on the Government. Then, the World Bank , commented that “this is the single-largest adverse shock” to government finances and Indian economy. This resulted in soaring Budget deficits for the Central and State Governments. The extra financial load was over 9% of the non-plan revenue expenditure.

This was a major concern when the 6^th PC was setup. However, Government is not feeling any brunt now, for having implemented the recommendations (with upward revisions included). The economy has changed over the last few years, and Government budgets are in much better shape as compared to those 90s. Government is in a position to pay high to its employees. With the present hike , the load is about 3.3% of the budgeted non-plan revenue expenditure only. That means , its quite comfortable for the Government to pay the “huge” salaries to its employees.

Pay Commission did not forget the poor taxpayers and the ‘aam admi’. They did say that improving the system efficiency is a must. That’s why they recommended many Administrative reforms. Though the Government was keen to implement the pay revisions, nothing seems to be taken up towards any administrative reforms.

The common man is almost sure that higher wages won’t result in any improvement in efficiency. Studies show that the Govt employees themselves don’t believe that higher pay would result any improvement at all. So, something different should be done for the reforms. For the ‘aam aadmi’, the huge pay hike would result in ‘higher disparity’ between the common man and the ‘blessed babus’. The gap widens, without any benefits to the common man and the tax payers.

Another comment in the media says that the whole lot of money paid (windfall gains !) to the employees would result in a boost for the ‘home improvement’ and ‘consumer durables’ sectors. And probably, that’s the only positive change that brings to the public at large. A media report says : “ While pay revisions are necessary, it is important to raise the perception in the society that the Government is an asset, not a constraint, towards a better future”.

A few million 'Millionaire babus'

Making a few million 'Millionaire babus' – for a few votes more.

All Central Govt employees were laughing all the way to their banks, on Friday. 6PC has made most of them millionaires and the rest of them almost close to that. All the babus got their revised heavier than ever pay and arrears on Friday. A large chunk of public money is drained out on this account, for a few votes more (in the next elections coming).
As I had pointed out earlier, one out of every five babus may deserve this million. The other four…. are parasites, unproductive and are absolutely undeserving.
The “huge” benefits recommended by the 6PC has further been iced by the Government, before serving, irrespective of who does what. This is certainly a “huge” mistake on the part of the Government (who has the responsibility to do justice to all ).

Yesterday, one babu went to the bank, laughing all the way , as he was happy about the rewards he got. Another four babus joined him, laughing at the public, all the way !

Sixth Pay Commission recommendations

In continuation to my earlier note on the Sixth Pay Commission recommendations, (notwithstanding, do you smell Govt language ? ), let me make it clear that I am not commenting on the Defence Services. I am not aware of and hence incompetent to comment on their payment structure. However, I know that their service conditions are entirely different from the 'Babus and scientists'; and they deserve the raise offered by Government.