Salary hike may not be burden on most States: Pay Commission

Their financial position is strong and buoyancy is expected in tax revenue
NEW DELHI: Unlike what was experienced after the Fifth Pay Commission, implementation of the Sixth Pay Commission’s recommendations is unlikely to impose a huge financial burden on the States.
In its report, the Commission has pointed out that most of the State governments will be able to pay the increased salaries to their employees as recommended in view of the expected buoyancy in tax revenues and their relatively strong financial situation.
“The revenues of the States are likely to be buoyant in the coming years, especially in the backdrop of an uptrend in the tax revenues of the Centre and consequent devolution to States ... It is observed that most of the States would be in a position to meet the additional expenditure,” the Commission said.
As for the Fifth Pay Commission, 20 out of the 28 States had implemented its recommendations while the total additional burden on them was in the region of Rs. 40,000 crore. The States which did not implement the recommendations were Andhra Pradesh, Assam, Himachal Pradesh, Karnataka, Kerala, Meghalaya, Punjab and West Bengal while some others adopted them with certain changes.
The Commission, however, has conceded that the actual financial position of each State could vary, depending upon the timing of implementation of the recommendations and the extent to which they were adopted.
According to Reserve Bank of India estimates, 19 out of the 28 States are likely to be in a revenue-surplus position by the end of this fiscal. Already, many States have eliminated the revenue deficit and thus achieved their target as stipulated in the Fiscal Responsibility and Budgetary Management Act, much ahead of the schedule of 2008-09, the report said. Alongside, implementation of the value-added tax regime by most States has resulted in an increase in tax receipts.
Besides, the Working Group on States’ Resources for the Eleventh Plan has also estimated that, at current prices, the aggregate resources for 28 States will increase from Rs. 1,99,384 crore in 2007-08 to Rs. 3,65,922 crore in 2011-12.
The RBI report, however, noted that out of the States which are expected to pay increased salaries to their employees, only Goa and Tamil Nadu are likely to be in a marginally revenue deficit situation at the end of 2007-08.
Such States, which are not in too comfortable a position to implement the recommended package, could consider deciding on a date of implementation different from that of the Centre along with staggered payment of arrears. Alongside, they should generate additional tax and non-tax revenues and cut down on expenditure, it said.
Special Correspondent
THE HINDU; Wednesday, Mar 26, 2008