7th Pay Commission: Modifications in pension revision formula, pay structure, pay matrices- Full statement

Must read the full statement of Finance Ministry dated May 04 - a day after the Union Cabinet approved modifications related to pension revision formula, pay structure and pay matrices of central government employees and pensioners including armed forces.

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"The Union Cabinet chaired by the Prime Minister Narendra Modi on Wednesday (May 3) approved important  proposals relating to modifications in the 7th CPC (Central   Pay Commission) recommendations on pay and pensionary benefits in the course of their implementation.

Earlier,   on   29th   June,   2016,   the   Cabinet   had   approved implementation   of   the   recommendations   with   an   additional   financial   outgo   of  Rs 84,933 crore for 2016-17 (including arrears for 2 months of 2015-16).

The  benefit  of  the  proposed  modifications  will  be  available  with  effect  from  1st January,  2016,  i.e.,  the  date  of  implementation  of  7th CPC  recommendations.

With the  increase  approved  by the  Cabinet,  the  annual  pension  bill  alone  of  the  Central Government is likely to be Rs  1,76,071 crore.  

Some of the important decisions of the Cabinet are mentioned below:

1. Revision of pension of pre–2016 pensioners and family pensioners

The Cabinet approved modifications in the recommendations of the 7th CPC relating to  the  method of  revision  of  pension  of  pre-2016  pensioners  and  family  pensioners based  on  suggestions  made  by  the  Committee  chaired  by  Secretary  (Pensions) constituted  with  the  approval of  the  Cabinet.   

The  modified  formulation  of  pension revision  approved  by  the  Cabinet  will  entail  an  additional  benefit  to  the  pensioners and  an  additional  expenditure  of  approximately Rs 5031  crore  for  2016-17  over  and above  the  expenditure  already  incurred  in  revision  of  pension  as  per  the  second formulation  based  on  fitment  factor.

It  will  benefit  over  55  lakh  pre-2016  civil  and defence pensioners and family pensioners.

While  approving  the  implementation  of  the  7th CPC  recommendations  on  29th June,  2016, the  Cabinet  had  approved  the  changed  method  of  pension  revision recommended by the 7th CPC for pre-2016 pensioners, comprising of two alternative formulations,  subject  to  the  feasibility  of  the  first  formulation  which  was  to  be examined by the Committee.

In terms of the Cabinet decision, pensions of pre-2016 pensioners were revised as per the second formulation multiplying existing pension by a fitment factor of 2.57, though the pensioners were to be given the option of choosing the more beneficial of the two formulations as per the 7th CPC recommendations.

In  order  to  provide  the  more  beneficial  option  to  the  pensioners,  Cabinet  has accepted  the  recommendations  of  the  Committee,  which  has  suggested  revision  of pension  based  on  information  contained  in  the  Pension  Payment  Order  (PPO) issued to every pensioner.  The revised procedure of fixation of notional pay is more scientific,  rational  and  implementable  in  all  the  cases.    The  Committee  reached  its findings  based  on  an  analysis  of  hundreds  of  live  pension  cases.    The  modified formulation   will   be   beneficial   to   more   pensioners   than   the   first   formulation recommended by the 7th CPC, which  was not found to be feasible to implement on account of non-availability of records in a large number of cases and was also found to be prone to several anomalies.  

2. Disability Pension for Defence Pensioners

The   Cabinet   also   approved   the   retention   of   percentage-based   regime   of disability pension implemented post 6th CPC, which the 7th CPC had recommended to be replaced by a slab-based system.  

The issue of disability pension was referred to the National Anomaly Committee by  the  Ministry  of  Defence  on  account  of  the  representation  received  from  the Defence  Forces  to  retain  the  slab-based  system,  as  it  would  have  resulted  in reduction in the amount of disability pension for existing pensioners and a reduction in the amount of disability pension for future retirees when compared to percentage-based disability pension.  

The decision which will benefit existing and future Defence pensioners would entail an additional expenditure of approximately Rs 130 crore per annum.

3. Changes in Pay Structure and Revision of the three Pay Matrices:

The   Cabinet,   while   approving   the   7th CPC   recommendations   for   their implementation on 29 th June, had made two modifications in the Defence Pay Matrix as under:

(i) Index of Rationalisation (IOR) of Level 13A (Brigadier) may be increased from 2.57 to 2.67.

(ii) Additional 3 stages in Levels 12A (Lt. Col.), 3 stages in Level 13 (Colonel) and 2 stages in Level 13A (Brigadier) may be added.

The Cabinet has now approved further modifications in the pay structure and the  three  Pay  Matrices,  i.e.  Civil,  Defence  and Military  Nursing  Service  (MNS).  The modifications are listed below:

(i) Defence  Pay  Matrix has  been  extended to  40  stages  similar  to  the  Civil Pay  Matrix: The  7th CPC  had  recommended  a  compact  Pay  Matrix  for Defence Forces personnel keeping in  view the number of levels, age and retirement profiles of  the service  personnel.

Ministry  of  Defence  raised  the  issue  that the  compact nature of the Defence Pay Matrix may lead to stagnation for JCOs in Defence Forces and proposed that the Defence Pay Matrix be extended to 40 stages.

The Cabinet decision to  extend the Defence  Pay  Matrix  will  benefit  the  JCOs  who  can continue in service without facing any stagnation till their retirement age of 57 years.

(ii) IOR  for  Levels  12  A (Lt.  Col.  and  equivalent) and  13 (Colonel  and equivalent) in the Defence Pay Matrix and Level 13 (Director and equivalent) in the Civil Pay Matrix has been increased from 2.57 to 2.67: Variable IOR ranging from 2.57 to 2.81 has been applied by the 7th CPC to arrive at Minimum Pay in each Level on the premise that with enhancement of Levels from Pay Band 1 to 2, 2 to 3 and onwards, the role, responsibility and accountability increases at each step in the hierarchy. This principle has not been applied in respect of Levels 12A (Lt. Col. and equivalent),  13  (Colonel  and  equivalent)  and  13A  (Brigadier  and  equivalent)  of Defence Pay Matrix and Level 13 (Director and equivalent) of the Civil Pay Matrix on the  ground  that  there  was  a  disproportionate  increase  in  entry  pay  at  the  level pertaining to GP 8700 in the 6th CPC regime. The IOR for Level 13A (Brigadier and equivalent)  in  the  Defence  Pay  Matrix  has  already  been  revised  upwards  with  the approval  of  the  Cabinet  earlier. In  view  of  the  request  from  Ministry  of  Defence  for raising the IOR for Levels 12 A and 13 of the Defence Pay Matrix and requests from others,  the  IOR  for  these  levels has  been revised  upwards  to  ensure  uniformity  of approach in determining the IOR.

(iii) To  give  effect  to  the  decisions  to  extend  the  Defence  Pay  Matrix  and  to enhance  the  IORs,  the  three  Pay  Matrices–Civil,  Defence  and  MNS–have  also been revised. While doing so, two calculation errors noticed in the MNS Pay Matrix have also been rectified.

(iv) To  ensure  against  reduction  in  pay,  benefit  of  pay  protection  in  the  form  of Personal  Pay  was  earlier  extended  to  officers  when  posted on  deputation  under Central Staffing Scheme (CSS) with the approval of Cabinet. The benefit will also be available  to  officers  coming  on  Central  Deputation  on  posts  not  covered  under  the CSS."