The cash crunch in banks and market post demonetisation drive has hit hard the preparations of the government to release higher allowances as per the 7th Pay Commission recommendations. The government wants to start payment of higher allowances under 7th Pay Commission for its 48 lakh employees and 52 lakh pensioners, but the cash shortage has compelled the government to delay it.
Prime Minister Narendra Modi on November 8 scrapped Rs 500 and Rs 1,000 banknotes in a bid to flush out cash earned through illegal activities, or earned legally but never disclosed to the taxman. The sudden move has caused cash shortage, with long queues outside banks and ATMs to exchange, deposit and withdrawal. The government fears if it releases higher allowances under the 7th Pay Commission, it would lead to longer queues outside banks and ATMs.
“The committee on Allowances headed by the Finance Secretary Ashok Lavasa has finalized the report on the allowances in October but the government don’t want to announce it now, so the government gave extension the committee till February 22, 2017 to submit the report on higher allowances for getting normalized the cash crunch position, ” Finance Ministry sources were quoted as saying by the Sen Times. The government is also considering the option of payment of higher allowances under the 7th Pay Commission recommendations without arrears.
While the government is paying higher basic pay with arrears, effective from January 1, 2016 to its employees on the recommendations of the 7th pay commission, the issue of higher allowances has been referred to the ‘Committee on Allowances’. The panel is waiting for Finance Ministry’s call to submit its report on higher allowances.