Interim Budget: Sops for central staff, promises for lay people
New Delhi: Finance Minister Jaswant Singh has rolled out a Rs 3,500-crore bonanza for central government employees, which formed the core of his interim Budget proposals for 2004-05. Effective from April 1, 2004, government employees will benefit on account of 50 per cent of the dearness allowance (DA) being merged with basic pay. Currently, the DA amounts to around 59 per cent of the basic pay. Unlike the various schemes announced over the past month - the Rs 50,000-crore each Agricultural Infrastructure and Credit Fund and the Industrial Infrastructure Fund, yesterday's move involves actual monetary outgo from the exchequer.

The total financial implication in a full year is projected at Rs 3,500-4,000 crore, which would be partially offset by additional income tax collections of Rs 400-500 crore accruing from the higher effective pay packet for the employees. But the impact may be beyond that. Some economists believe that Jaswant Singh's announcement could trigger off similar demands from state government employees to merge DA with basic pay, implying a repeat of the fall-out of the centre's decision in 1997 to implement the Fifth Pay Commission's (FPC) package.

Singh, however, dismissed these fears, pointing out that the FPC had recommended that the DA be merged with basic pay whenever it exceeded 50 per cent of pay and today's decision was based on an `in-depth' re-examination of this suggestion. Expenditure Secretary D Swarup said that the 50 per cent threshold had been crossed in September 2002 itself. "But we did not take a decision then, keeping in view our not-so-healthy finances."
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