Columns: Kautilya

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India Today, March 22, 1999
March 22, 1999

KAUTILYA
Slim Down Our Babudom

More pay and less work in government is leading to fiscal collapse.

By Jairam Ramesh

In his recent budget speech, Finance Minister Yashwant Sinha very rightly criticised the predecessor United Front regime for ignoring the recommendations of the Fifth Pay Commission on the restructuring of government. Against the advice of the then finance minister and cabinet secretary, I.K. Gujral's cabinet abdicated all sense of proportion and responsibility by providing a huge pay hike to around 3.9 million central government employees. The total expenditure on this huge army in 1999-2000 will come to about Rs 32,000 crore as compared to a plan outlay of Rs 27,400 crore in the energy sector and of Rs 17,400 crore in the social sectors. And this excludes the annual pension bill of over Rs 10,000 crore.

However, Sinha is being a trifle unfair. In 1997, there was no politician who had the courage to take a stand publicly against the pay hike. In fact, leaders cutting across party lines addressed rallies almost daily in support of these recommendations and none came to the support of P. Chidambaram, who, seeing the writing on the wall and being subject to a daily barrage of slogan-shouting in his office, threw in the towel pretty easily.

But what is Sinha himself up to? His ministerial colleagues are busy trying to re-negotiate settled pay and allowance packages. Worse, Sinha himself took an atrocious decision in January that flies in the face of expenditure control. He made the basic pension of all those government servants who retired before 1.1.96, which presumably includes himself, equal to at least 50 per cent of the minimum of the revised pay scales, making the pension more than the salary ever drawn. This is a wholly undeserved bonanza.

And just as he announced the "abolition" of four secretary-level posts in his ministry, right under his nose two defunct additional secretary-level posts in the Central Boards of Direct Taxes and Excise and Customs are being revived.

Kautilya lauds Sinha for at least using dreaded words in his budgets. In 1998 he used that perilous P word: privatisation. This year, it is the dangerous D word: downsizing. Two aspects of government employment will determine the nature and speed of downsizing. First, the overwhelming bulk of employment and expenditure is in just five areas -- railways (40 per cent), police and paramilitary forces (14 per cent), civilian defence (13 per cent), posts (9 per cent) and telecom (9 per cent).Thus around 85 per cent of establishment expenditure is in what may be called "operational" areas, as opposed to the other 15 per cent, which is in purely "administrative" areas.

Second, 94 per cent of employment and expenditure is in group C and D posts -- that is stenographers, clerks, assistants, peons, postmen, daftaries, police constables and so on. Government employment has great social value in these two categories. Something like 20 per cent of group C and 28 per cent of group D employees and 68 per cent of sweepers belong to the SC/ST category. One option for downsizing may well be to abolish the approximately 3.2 lakh vacancies that exist. But this will have to be tempered to reflect the nature of the vacancies. Blind abolition if the posts are reserved for SCs and STs will be neither desirable nor feasible.

The protection that government employees get under Article 311 of the Constitution and under the rules framed following various judgements of the Supreme Court make it impossible to impose any form of performance-based employment in government, a prerequisite for any downsizing. These rules should be amended. In addition, the logic of having the "operational" segments of the railways covered by laws like the Industrial Disputes Act needs a relook.

Perhaps keeping in view that about 3 per cent of employees retire every year, the Pay Commission had suggested that a 30 per cent reduction in government employment be carried out over 10 years. By then, the Sixth Pay Commission's recommendations will be implemented. This is a worthwhile objective but requires detailing.

The commission says a freeze on recruitment alone can do the job. This is unrealistic. So other options like mergers and abolitions of ministries, the transfer of centrally-sponsored schemes to states in areas like agriculture, education and health and the introduction of a liberal "golden handshake" after 20 years of service to supplement the existing VRS assume greater importance.

Often, the smokescreen of parliamentary accountability is used to justify the continuation of unnecessary departments like banking and insurance, both in Sinha's own bailiwick. Such arguments have to be brushed aside. A beginning could be made in downsizing the 5,510-strong Planning Commission. It costs the exchequer over Rs 70 crore a year. The "operational" areas, specifically railways, posts and telecom, must also be reorganised into fully commercial entities.

Finally, will Sinha have the courage to change the structure of allowances? Going by past trends, the overtime bill alone in 1999-2000 will come to about Rs 640 crore, health and education allowances to Rs 270 crore and the leave travel concession to Rs 160 crore. And while we are at it, how about a six-day week as some return to the nation in terms of extra work for the pay windfall?

The author is secretary of the AICC's Economic Affairs Department.
The views expressed here are his own.

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