A few weeks ago, we reported how, thanks to the 6th Pay Commission salary hikes, even once upon a time blue-chips like telecom company MTNL were careering towards fiscal disaster. MTNL is a classic - its salary bill is higher than revenues. To be specific, for the year ended 2010, employee cost was Rs 4,869 crore while sales were Rs 4,892 crore. Oh, sales look higher you say? Yes, we forgot the 'Other Income' figure of Rs 1,234 crore. Net sales were actually at Rs 3,658 crore. The reason: the 6th Pay Commission caused the salary bill to leap from Rs 2,065 crore in 2009 to Rs 4,869 crore in 2010.
While there are several reasonable estimates of the expanded Government wage bill (gross), our worry is there is little study on the individual impact on an array of government institutions, state governments and public sector bodies, particularly in context to their existing size and revenue generating capability. While in some cases (telecom company BSNL), organisations can absorb higher wage bills, MTNL-like cases are untenable. While hikes in themselves cannot be faulted, it’s surely another opportune moment to question the size of government and its efficacy.