States urged centre to bear cost of pay hike implementation

State governments, in a unanimous decision, have asked the Centre to bear 50 per cent of the cost from implementing Sixth Pay Commission recommendations in the backdrop of the economic slowdown, which has depressed revenue collections.

In addition, the states also sought relaxation of fiscal deficit targets by another 2 per cent of their Gross State Domestic Product (GSDP) for at least two financial years, from the current level of 3.5 per cent of GSDP. If implemented, this would mean additional borrowing of nearly Rs 1,20,000 crore over the next nine months of fiscal 2009-10.

“There was a consensus among states that 50 per cent of the expenses arising out of implementation of the Sixth Pay Commission should be borne by the Centre,” said Assam Chief Minister Tarun Gogoi, after emerging from the first ever pre-Budget meeting between states and the Union finance ministry.

Chief Ministers Prem Dhumal (Himachal Pradesh), Digambar Kamat (Goa) and Finance Minister of Chhattisgarh Amar Agarwal also toed the same line after the meeting. “States are facing difficulty in revenue generation. The Centre should bear the cost of the Sixth Pay Commission to help us,” Kamat added.

Though Sixth Pay Commission is applicable only for central government employees, many states benchmark their pay revision based on central pay commission.

The Sixth Pay Commission recommendations were accepted by the Union Cabinet on August 14. The recommendations lead to an average increase of 21 per cent in salaries of 5 million government central government employees. The central exchequer’s annual cost went up by Rs 17,798 crore because of the new wage structure. Moreover, the recommendations also cost the government Rs 29,373 crore on account of arrears from January 2006 and August 2008.

Source : Business Standard.