Monday, November 24, 2008

PSU pay hike

The government has approved the Justice MJ Rao report on pay packages for PSUs. Good. But why does the media get hysterical about pay rises in the public sector? When the central government pay hike was announced, media reports talked of an increase of "over 40%". I showed through my calculations that the increase was 13%. I am inclined to believe that the media prejudice against all things governmental is so great that they are just not happy to see any pay rise in government.

Now, I have been seeing reports about 100-200% pay hikes for PSUs. Rubbish. The chairman of ONGC will get a basic salary of Rs 1,25,000 per month. Is this five times his earlier pay of Rs 25,000. Yes, but only if you compare basic with basic. What happens in government pay revisions is that the basic and DA get merged and there is an increase over that, with DA starting from zero all over again. This is the increase (new basic plus DA versus old basic plus DA) one must look at- and it comes to 20-25% in PSUs. And this increase is happening after 10 years whereas in the private sector, the annual increment would be 25%.

Of course, there are performance-linked incentives in the new scheme of things but these apply mainly at the top. There is an improvement in public sector pay but it will still lag behind that in the private sector in cash terms. The real benefits in the public sector are of the non-cash variety: job security, pension, medical benefits and housing and the sheer richness of the job.

Should pay in the public sector improve a great deal more? Not necessary. One consequence of the ongoing turbulence is that people here are going to re-evaluate the relative merits of public and private sector jobs- and my guess is that there will be a better appreciation now of the former.

1 comment:

Abhimanyu said...

Well said Ram, The real increase is only 25 30 percent...
I work for a PSU and I know that we are second to no private company..