In an Independence Day bonanza for government employees, as first reported by The Indian Express, the Cabinet announced a jump in allowances and salaries beyond what was recommended by the pay panel to ensure that each employee gets a minimum 21 per cent increase over the current salary. Most demands put forward by Defence forces have also been met in the revised pay structure.

The wage hike would ensure that minimum emolument of a government employee would be in excess of Rs 10,000 per month. The modifications made by the Cabinet in the pay panel recommendations would increase the financial implication for the Centre by Rs 17,798 crore annually and the arrears — to be given with effect from January 2006 — would cost Rs 29,373 crore. Modifications made by the Cabinet would mean an extra burden of Rs 11,000 crore for the government.

The new salaries would be given to the employees beginning September and arrears (from January 2006) would be given in two installments — 40 per cent this fiscal and 60 per cent in 2009-10. The arrears would be given in cash to employees just before the Diwali festival season.

The annual increment rate for all employees has been increased by the Cabinet from 2.5 per cent (recommended by the pay panel) to 3 per cent.

While the Home Ministry could not push through demands of the police and paramilitary forces in earlier discussions, an intervention by RJD leader Lalu Prasad Yadav ensured that each state creates at least one DGP-level post equivalent to the Chief Secretary. This move was supported by NCP leader Sharad Pawar and Power Minister Sushil Kumar Shinde.

For the armed forces, the Cabinet has met the demand of moving Colonels and Brigadiers to a higher pay band (PB-4). This comes after the forces protested against the “unfair deal” given to mid-level officers. For senior Lt Gen-level officers posted at Defence Headquarters, the Cabinet has corrected an anomaly by making their salaries equivalent to Commanders in the field.

Soldiers too have been given an enhanced allowance that will bring the salary of each by at least Rs 1,000 over and above the pay panel suggestion. All soldiers will be given an enhanced Military Service Pay (MSP) of Rs 2,000, up from the recommended Rs 1,000.

The Cabinet has also approved at least three assured promotions for all Defence personnel and civilian employees. Civilians would get assured promotions after 10, 20 and 30 years of service while jawans will be promoted after 8, 16 and 24 years.

The armed forces have welcomed the modifications made by the Cabinet and have said that all concerns of the Defence forces appear to have been suitably addressed. “Even as more details are awaited, prima facie, all concerns of the Defence forces appear to have been suitably addressed. Increase in MSP of PBORs and compensation for middle-rung officers are particularly heartening. The decision to credit arrears with effect from January 1, 2006 is most welcome,” said Admiral Sureesh Mehta, Navy chief and Chairman of the Chiefs of Staff Committee.

A separate pay scale has also been carved out for DGPs, GM (Railways), members of boards of Income Tax, Customs and Central Excise, Postal and Ordnance Factories among others to take them to the level of Rs 80,000 in two years as against the three years in the pre-revised scale.

Middle-level police and civilian officers like DIGs, Conservator of Forests, Scientist E and F etc have also been placed in the highest pay band of PB-4.

While there were fears that the revised pay scales may have an impact on inflation, Finance Minister P Chidambaram said there was no threat of missing the budget deficit targets. “The impact of the pay commission report on inflation was factored into when the Cabinet cleared the report after Committee of Secretaries suggested modifications on the report,” he said.

According to Chidambaram, the burden on the Union Budget would be Rs 15,717 crore and Rs 6,414 crore on the Railway budget for the current financial year.