7th Central Pay Commission submits report, proposes 23.55% salary hike

7th Central Pay Commission (CPC) headed by Justice AK Mathur has recommended 23.55 percent hike in pay and allowances of government employees.
In this regard the commission has submitted its report to Union Finance Ministry in New Delhi and the recommended pay revision will come into effect from 1 January 2016.
Recommendations of 7th CPC

• Minimum basic pay of 18 thousand and maximum of 2.5 lakh rupees per month.
• Abolition of grade pay and pay band structure. The rate of annual increment for employees will be three percent.
• The pay will go up by 16 percent, allowances by 63 percent and pension by 24 percent.
• Abolition of 52 allowances and introduction of a Health Insurance Scheme.
• One Rank One Pension (OROP) scheme for central government staffers, para military as well as armed forces personnel.
• Increase in military service pay and revised pension formula for civil employees including Central Armed Police Forces (CAPF) and Defense Personnel retiring before 1 January 2016.

Implications

• The pay revision will impact 47 lakh serving employee and 52 lakh pensioners of the Central Government including in the Defence and Railways.
• It will cost public exchequer over 1 lakh crore rupees annually.
• The implementation of Pay Commission will impact fiscal deficit by 0.65 percent.

Finance Ministry is setting up committee headed by Expenditure Secretary to go through the report for its implementation.
Background
The 7th Central Pay Commission was set up in February 2014 to revise remuneration of employees and pensioners of central government including Defence and Railways. Its recommendations will also have a bearing on the salaries of the state government staff.
The CPC is constituted by the Union Government after almost every 10 years in order to revise the pay scales of employees. The 6th CPC under the Chairmanship of B.N.Srikrishna was approved in July 2006.

Month: Current Affairs - November, 2015