Wage Hike In Punjab: Another Example Of Competitive Populism

  

The medical fraternity in Punjab has rolled up their sleeves against the recommendations of  Sixth Pay Commission to be implemented from July 1, 2021, with retrospective effect from January 1, 2016.  On Friday, government doctors, including PCMS, ayurvedic, homeopathic, veterinary, rural medical officers, and senior officials of the health department, observed a pen-down strike all over the state on a call given by the Joint Punjab Government Doctors’ Coordination Committee, to protest the 6th Pay Commission recommendations. Doctors are demanding that the NPA should be increased to 33 percent and linked with the basic pay. They also want the doctors who worked as frontline warriors should be given a special allowance. 

There are nearly 5.4 lakh government employees including pensioners. Out of them, 3,53,074 are the current employees and rest pensioners.  Nearly 1,52,646 are covered under the New Pension Scheme (NPS). The expected amount of arrears from 1 January 2016 to 30 June 2021, will be nearly a whopping Rs.13,800 crore. However, new employees will be paid as per the central government’s pay scales, which now apply to all new recruits.

The Punjab sixth pay commission had in May this year recommended an over two-fold jump in salaries of all state government employees, and an increase in minimum pay from Rs 6,950 to Rs 18,000 per month, with retrospective effect from January 1, 2016. 

The minimum pay for a government employee in the state will now increase from Rs. 6,950 per month to Rs.18,000 per month and the minimum pension will go up from Rs.3,500 per month to Rs.9,000 per month.

The implementation of the recommendations of the sixth pay commission will burden the state exchequer 2.59 times more in salaries and pensions over the previous pay commission recommendations. With an annual increment of three percent, resulting in pay scales of all existing employees continuing to be higher than that of Haryana, claimed the official statement.

It will put an additional burden of Rs.8,637 crore on the exchequer with a prospective additional net annual burden of nearly Rs.4,700 crore.

Punjab is already reeling under a financial crunch. As against the gross domestic revenue of Rs,88,050 crore (US$12 billion) (2020–21 ), the expenditure touched R. 1.55 lakh crore (US$22 billion) in 2020–21, almost double of its revenue. The burden of enhanced salaries and pensions will rise further. Resultantly, Punjab raised excessive finances through market borrowings and ways and means advances (WMA)from the RBI.  

It may be recalled that Punjab ranked first in GDP per capita amongst Indian states in 1981 and fourth in 2001. However, due to lower growth in recent years, having the second-lowest GDP per capita growth rate of all Indian states and UTs between 2000 and 2010, behind only Manipur, Punjab is now ranking 16th amongst Indian states with  Rs. 6.44 lakh crore (US$90 billion) in gross domestic product and a per capita GDP of US$2,500. 

Punjab has been raising excessive finances through market borrowings and ways and means advances (WMA) from the RBI. The state is a classical example where committed liabilities-salary, pension, subsidy, and interest-  are much higher than its income. For a healthy economy, state taxes need to add up to 13 to 14 % of its GDP (Gross Domestic Product). In the Punjab case, it's adding up just 7-8 %.  It's no secret that Punjab has failed to pay salary and pensions to its employees in time many times. Even many govt departments failed to pay electricity bills and faced power disconnection.

Competitive populism has cost Punjab too high. The implementation of the sixth pay commission is also a populist measure as assembly elections are near. But govt hasn't made it clear how will it meet the extraordinary financial burden. As of now, it looks certain,  govt will have to borrow. Govt's debt burden has increased by nearly 15,000 crore every year. With additional wages burden, it may exceed even 20,000 crore annually. This situation may lead to debt trap.

(Chander Sharma)