Even as members of the Pay Commission are holding consultations with various sections of the society, the government has indicated that performance-based incentives would be instituted in the civil service.
At the Friday Meet yesterday, Lyonchhen Dr Lotay Tshering said the pay commission is an autonomous body with a constitutional mandate.
However, during its formation, the Prime Minister said that he had asked for a ‘unique’ reform in the pay and allowance of public servants. The fourth pay commission, he said was asked to look into rewarding skills and hard work and advised to conduct adequate consultations.
While there isn’t any doubt on the capacity of commission members, Lyonchhen said that he would not hesitate to re-constitute another pay commission if the reforms suggested lack the ‘wow’ factor.
Lyonchhen said that a revision based on flat percentage is not in keeping with the government’s slogan of narrowing the gap. “A five percent revision on Nu 5,000 and five percent revision on Nu 50,000 is not fair,” he said.
Even in the same position classification, for instance, he said, Nu 15,000 to all P1 level employees is not fair because the responsibilities and input differed among sectors and professions.
On the government’s pledge to provide fortnightly salary, the Prime Minister said that it is still on and doable. Since civil servants depend on the monthly paycheck, their personal financing outlay has to wait until the month ends and they are unable to save much. Fortnightly, paycheck, he said would encourage civil servants to save more.
However, he clarified that the government is not in a position to give more details as the pay commission still on the task. This includes the financial implications.
Pay and allowances form 35 percent of current expenditure and by Constitution, current expenditure must be met from domestic revenue.
The total expenditure for 2018-19 is estimated at Nu 45.12B of which Nu 29.07B, or about 65 percent, is current expenditure and remaining Nu 16.05B capital expenditure.
Of the total resources, the domestic revenue estimate for FY 2018-19 is Nu 33.94B, meaning that 85 percent of the domestic revenue would be consumed by current expenditure.
With the country preparing to graduate from LDC, domestic resources should not only cover the current but also the capital expenditure, since graduation entails declining aid and grant.
Even the domestic resources, according to the budget report is largely contributed by tax revenue of Nu 25.03B. This means that more than 86 percent of current expenditure is met from tax revenue.
However, a spike in domestic revenue is expected under non-tax revenue as profit transfers of Nu 8B from the commissioning of Mangdechhu hydropower project is accounted for in FY 2019-20.
Revenue impact from new fiscal measures like broadening tax base through introduction of GST, if implemented, is expected to generate additional revenue.
In the 12th Plan, growth in domestic revenue is projected at Nu 210B, an increase of 25 percent. Indirect tax is projected to decline due to non-receipt of GoI excise duty refund with the introduction of GST in India.
In the 11th Plan, pay and allowances constituted 40 percent of the current expenditure, according to RMA’s annual report. The report states that establishment of new state enterprises has exerted more pressure on the current expenditure and the country witnessed an expansion in public servants by 3.7 percent in 2017.
Since the transition to democracy, pay revision has become an integral part of party manifestos, often overlooking the source of revenue.
Looking at the past trends, hydro revenue was central and a decisive factor in determining the pay raise. In 1986, Chukha was fully commissioned and in 1988 civil servants’ pay raise ranged between 112 percent to 341 percent, with GSP level taking the lowest raise and EX level taking the highest.
Another revision followed in 1996 with GSP level endearing 82 percent and EX level taking a raise of 30 percent. In 1997, a flat 20 percent raise was given across the board. Another raise came in 1999 with a 25 percent revision in the lower cadre and 20 percent in the higher level. In 2005, 45 percent revision was given on the 1999 scale, which was provided as lump sum salary allowance.
After Tala was commissioned, in 2006, civil servants’ pay increased by at least 52 percent.
The first constitutionally formed pay commission got to task in 2010 recommending a 35 percent flat revision.
Soon after the last government came to power in 2013, the second Pay commission was instituted and the pay revision ranged between 19 and 21 percent, with lower grade civil servants taking the higher raises and vise versa. In addition, a 20 percent house rent allowance was provided across the board.
Chukha power tariff revision of chheltrum 25 has generated Nu 450M annually since 2014, and this was fully injected to source the pay revision.
However, this too fell short and the second pay commission recommended cost cutting measures such as containing the civil servant growth at two percent a year in the 11th Plan. The second pay commission also stated in its report that by cutting down in-country travel of civil servants at 15 percent of the wage bill, the government would save Nu 428M. The highest savings in the expenditure will be from the pool vehicle recurrent cost and monetising vehicle quota for civil servants.
These instances imply that most of the revenue or additional revenue from the hydropower projects have gone into paying the revised pay and allowances of the civil servants. This, according to few analysts, is unfair since the hydropower is a national asset and water, which spins the turbines are natural resources belonging to the state. Its benefits must be spread across all sections of the society.
Past trends also show that the parliamentarians took a fatter pay revision because the MPs have the authority to amend the parliamentary entitlement Act.
In 2014, the Druk Nyamrup Tshogpa, issued a press release stating that it was ashamed to face the people of Bhutan with the way the parliamentarians were setting a wrong precedent by raising their own salaries and vehicle allowances, and serving themselves instead of serving the people.
At that time, the economy was shrivelled with a growth of about 2 percent and various restrictions on loans and imports being placed.
The formation of the third pay commission benefitted only the local government leaders.
Another aspect of the revision was the inflation rate. During the 2014 pay revision, it was found that inflation since the last revision has touched 20 percent.
But since 2014 to 2018, average inflation was about 24 percent, 4.75 percent annually. In the last five years, the highest inflation was recorded at 8.30 percent in 2014 and the lowest in 2018 at 2.69 percent.
In the last revision, corporations were given leeway based on affordability but the finance ministry came out with a broad guideline to revise the salary of corporate employees. Prior to that, salaries of corporate employees were maintained 15 percent higher than civil servants.
However, employees of private sector, who do not enjoy the benefits of civil and public sector, are hit the hardest when pay revision rakes up the prices of commodities and rentals.