A wage hike higher than those recommended by the Sixth Pay Commission, marginal increase in annual increments and the payment of arrears in cash are some of the sweeteners incorporated in the proposal for Thursday’s Cabinet meeting after Prime Minister Manmohan Singh’s intervention.

The new pay package for the 55 lakh Central government employees, to be announced on August 15, proposes a 20 per cent raise over the pay bands suggested by the Commission. The panel in May suggested a gross 40 per cent hike, which means an effective 25 per cent after taxes. “The net jump in pay would be upwards of 30 per cent with the additional increase more for lower grade staff to narrow their difference with the (pay of) senior officials,” said sources.

This raise takes into account the Commission’s miscalculation of the dearness allowance - absorbed in the new basic pay—as 74 per cent whereas it should have been 83 per cent, they said. The proposed annual increment in the basic pay would also be a tad higher than the 2.5 per cent suggested by the Commission.

The Cabinet proposal talks of a uniform 3 per cent raise every year. The current norm is a Rs 500-increase in the basic pay annually within the grade scale.

But what would be music to the bureaucrats’ ears is that the PM has shot down Finance Minister P Chidambaram’s suggestion that the new wage be effective from January 2007 instead of January 2006 because of the heavy run on this year’s Budget. Chidambaram had also wanted that the past dues be parked in the General Provident Fund to be provided as pension after retirement of the employees so that this year’s outgo from the Budget would be limited to Rs 12,500 crore.

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