Centre woos government staff with DA hike to 100% of basic pay; VRS

The central government today approved a slew of measures, including DA hike, voluntary retirement schemes and cash assistance for payment of wages, to benefit government employees and employees of state-run enterprises ahead of the declaration of elections to the Lok Sabha and the imposition of the model code of conduct that would bar the government from announcing any beneficiary schemes.

The union cabinet today announced a hike in dearness allowance for its 5 million employees and 3 million pensioners, bringing the rate to 100 per cent of basic pay from the existing 90 per cent - a 10 per cent increase.

The current round of DA hike, the second double digit hike in a row in the second half of the current financial year, is effective from 1 January this year.

The largesse comes at a time when the fiscal deficit had exceeded the full-year estimate in February itself (See: India's April-Jan fiscal deficit crosses full-year target, hits Rs5,33,000 cr) and  core sector growth slowed (Core sector output growth slows to 1.6% in January)

The government had offered a similar 10 per cent increase in in September 2013, which was effective from 1 July 2013.

Besides the cabinet committee on economic affairs (CCEA) approved a proposal for providing non-plan budgetary support of Rs181.54 crore for a voluntary retirement scheme (VRS) for employees of Hindustan Photo Films Mfg Co Ltd (HPF), Udhagamandalam (Tamil Nadu), a central public sector enterprise (CPSE) under the department of heavy industry.

The VRS package, based on the 2007 notional pay scales, is being offered as a one-time relaxation of DPE guidelines for all employees - employees of the company are still in the 1987 pay scale.

The enhanced VRS will help HPF employees in their post retirement rehabilitation.

The CCEA also approved financial assistance of Rs200 crore in the form of a soft loan to Indian Telephone Industries Ltd for meeting the salary obligations to its employees.

The soft loan of Rs200 crore is for payment of salaries to the employees of ITI Ltd. Salaries will be disbursed as and when they are due. This would offer direct benefit to 7,633 employees and their family members.

As the proposal is for payment of salaries, there will be no direct or major financial impact, the CCEA said. The soft loan will ensure that employees of ITI Ltd receive their salaries on time and motivate them to work in the company, which is on a slow and steady comeback trail from being a `sick' company.

(Also see: Pay panel to suggest merger formula of DA and basic pay for central staff)