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Dhaka entry may not be free!

Pay Commission proposes ways to cover salary hike of govt employees

Rejaul Karim Byron
The Pay and Service Commission has recommended several steps, including imposition of toll at all entry points of the capital, to collect the additional money needed to pay the increased salary of public servants.
"The government may collect revenue by introducing arrival toll through automated machines at all entry points of Dhaka metropolitan city," said the commission report.
But experts criticised the idea and termed it unrealistic. They said it would increase travel time and push up inflation.
Led by former central bank governor Mohammad Farashuddin, the commission submitted its report to the finance minister on Sunday. The committee proposed a 100 percent pay raise on average for government employees of all grades.
The report gave a detailed estimate of the money required to pay the hiked salaries and allowances of 12.66 lakh government employees, 4.53 lakh pensioners and 3.44 lakh teachers of MPO-listed non-government schools and colleges.
If the commission's recommendations are fully implemented, the government expenditure on salary and allowance in the next fiscal year would go up by 63.7 percent orTk 22,953 crore.
Of this, Tk 17,464 crore would be needed for government employees, 3,790 crore for pensioners, 1,688 crore for teachers of MPO-listed school and college and Tk 10 crore for employees of autonomous organisations.
The report, obtained by The Daily Star, does not include allocation for defence sector development project staff.
The commission also recommended that the government strictly cut expenditure in unproductive sectors for the next two to three years.
AB Mirza Azizul Islam, former adviser to a caretaker government, said there was much scope for the government to cut wasteful expenditure. But the idea of introducing toll at the capital's entry points to collect revenue was not realistic.
First of all, it will increase travel time. Then it will push up inflation because if the government collects toll from a goods-Iaden vehicle, prices will go up. Moreover, the toll might be misused by those responsible for its collection, he noted.
The government can reduce unnecessary expenditure by cutting subsidy on state-owned enterprises. Moreover, if the government can utilise more foreign aid, it will save revenue income and the government can use that money to meet its additional expenditure for increased salary, he said.
The commission has suggested implementation of the Vat and Supplementary Duty Act 2012 to earn more revenue. This would take the government's current contribution of 60 percent in the ADP to up to 90 percent.
It also proposed increasing land development and entertainment tax and judicial and non-judicial fees, and introducing Tk 20 revenue stamp instead of Tk 10 against salaries of government employees.
Also, government institutions, including Chittagong Port, BTCL, education boards and educational institutions enjoying MPO benefits will deposit, as proposed by the commission, at least 50 percent of their operational surplus in the government exchequer.
It also proposed imposing more tax on buses and trucks older than 10 years.
Zahid Hussain, lead economist at the World Bank Dhaka office, supports
the pay hike but is doubtful about the realisation of the additional money in the way the commission proposes.
"The commission has recommended increasing tax revenue collection to finance the pay increase. Clearly, borrowing to finance pay increases does not make economic sense," he said.
But there is room for reducing "wasteful” expenditures and some of it may happen fortuitously because of the fall in oil prices on the international market. For instance, the combined losses of Power Development Board (PDB) and Bangladesh Petroleum Corporation (BPC) last year amounted to Tk 95.8 billion, of which PDB loss was two-third. Oil price decline will have a direct positive impact on BPC's bottom line, he added.
He said the government needed to revisit the revenue and development budget to identify cost savings that will not hurt the quality and coverage of service delivery.
In FY2014-15, the budgetary allocation for salary and allowance of government employees, pensioners and non-government school and college teachers isTk 36,017 core. The pay hike will take this allocation to Tk 58,970 in the next fiscal.
The commission estimates the FY15-16 budget to be Tk 3,13,071 crore, up from Tk 2,50,506 crore in the current fiscal.
A finance ministry official said the additional Tk 17,464 crore needed to pay the increased salary and allowance will be needed in phases. Of the sum, Tk 10,090 in salary will be required in the next FY while Tk 7,373 crore in allowance in the FY16-17.