Economic Highlights

New Delhi, 18 October 2007

Govt’s Non-Productive Expenditure

CUT FLAB OF BULGING BUREAUCRACY

By Dr. Vinod Mehta

(Former Director, Research, ICSSR)

There is by and large a negative opinion about the bureaucracy and any new pay scales recommended by periodic Pay Commissions have been perceived as a burden on the Government finances. This was so when the recommendations of the Fifth Pay Commission were accepted a decade ago. If one goes by media reports then the pay scales being considered by the Sixth Pay Commission are likely to raise more hackles.

In the strictest economic sense of the term the work of the bureaucracy can be termed as "non-productive."  But there are other areas where there is wasteful expenditure by the Government. Therefore, sensible administrative policies can help reduce the expenditure of the Government substantially.

The term bureaucracy, used in a wider sense, includes not only Central Government employees but also those working in State Governments, various autonomous bodies functioning under various ministries of the Central and State Governments, railways, posts and telegraphs, universities, police and so on.

One component of the administrative expenditure is the salaries and wages of the employees (including certain allowances like LTC, medical etc). The second component is composed of expenditure on construction of office blocks, stationery, transport, postage, travel of personnel on official work, expenditure on numerous advisory committees, litigation etc.

Big Scope To Cut Flab

Almost all economists and policy makers agree that there is not only room but a very big scope for reducing the costs of administration. In most countries, especially in the developed ones, retrenchment and re-employment is a common feature. People move in and move out of Government jobs quite frequently. 

In India, however, the idea of retrenchment from a Government job is still not acceptable. This is understandable, because getting a job here is tough. Once a person has lost the job there is no guarantee that he or she will find a new job. Therefore, the direct approach of some of the developed economies will not work and should not be adopted. 

The way out for shedding bureaucratic fat lies in an indirect approach, which could be more suitable to our own conditions and also in consonance with our liberal economic reforms.

Rules A Roadblock

If one were to look at our Government service rules and regulations one will find that many of these rules are coming in the way of reducing the size of the bureaucracy even though the salaries and wages are a pittance compared to salaries and wages paid in the private sector.

According to the Government service rules, a Government employee is entitled to full pension after 33 years of service, leave encashment up to 300 days (a la Fifth Pay Commission), plus gratuity calculated on the basis of half a month salary for every year worked. 

A Government employee can also go on deputation to another Government office with all his privileges fully protected.  But if the same Government employee wishes to leave the Government job at any point to take up a job in the private sector or to start his own independent work, the Government rules strongly come in his way of getting out.

No Lien On Job

Firstly the Government employee cannot keep a lien on his job if he works in the private sector or sets up his own shop.  He is expected to resign. Secondly, if he resigns he loses his retirement benefits and to top it all loses the gratuity due to him and his accumulated leave, which he cannot encash.

This creates a psychological fear in the minds of those who quit Government service that if they don’t succeed in their new job they will have nothing to fall back upon. This is to some extent true. Besides, all those who leave Government job in the middle of their careers may not be successful in a new work place.

Therefore, what is required is a change in the service regulations of the Government which facilitates the exit of a Government employee and provides him some cushion in case he does not succeed in his new work.

Make Rules Liberal

Cleary, it is necessary to make the service rules more liberal. As a first step, those of the Government employees who wish to take up jobs in the private sector or start their own independent work may be allowed to keep lien on their jobs for a period of three years. This period is enough for anyone to make up his or her mind whether they wish to come back to their Government job or want to resign.

And if after three years they decide to resign from the Government job, then they should be allowed to leave, encash their accumulated leave, given the gratuity due to them and some monetary compensation for the retirement benefit which they would be losing if they chose to reign. Some formula on the basis of their basic pay and dearness allowance can be arrived at.

At a time when the gaps between the incomes of Government employees and employees in the non-Government sector are widening, the liberal service conditions will help a large number of Government employees to leave the Government jobs of their own will and thus help reduce the size of bureaucracy and in turn the cost of administration.

Need For Contractual Jobs

The Government can also introduce a kind of contractual employment at a higher level where the services of a specialist are needed for a specific purpose and for a specific period.  For instance, a non-specialist bureaucrat trying to develop a health policy with the help of a specialists committee. It may be less expensive to employ an expert or two in this field to prepare the policy. This will also help save a lot of money which currently goes into meeting the expenditure related to the organization of committee meetings which includes cost of air travel, daily maintenance, honorarium or sitting fee and so on.

To cut down the administrative expenditure that relates to the second component, as stated in the beginning, the Government will have to look into a gamut of ways --- conventional and non-conventional.  As a first step, the Government needs to adopt the rule of "minimum essential governance". 

An example. If some autonomous body under a ministry wishes to carry out a certain activity, the ministry need not enter into a lengthy correspondence with the autonomous body on this issue. It should only lay down the policy for their work and carry out periodic reviews to see if the policy is being followed or not. The idea of "minimum essential governance" can be extended to other areas also. When the Government adopts this idea the paper work will also be reduced considerably. 

Use More Computers

Again the large scale use of computers, E-mails and data transfer facilities in Government departments not only saves paper and postage but also precious time. All office memos, circulars, queries, orders can be made through networked computers in a fraction of time. Thus, saving large amounts of stationery, postage, messenger time, transport et al.

Similarly, the modern communication network can be used to hold committee meetings with experts sitting in their respective cities. This will help save costs on air travels, maintenance allowance and so on.  Needless to say, modern technology today has made it feasible to have a “paperless” and "travel-less" office.  This is a policy decision, which the Government must take at the earliest to save on administrative expenditure.

Computerization will definitely help reduce expenditure on transport, but still it may be useful to reduce and restrict the use of Government transport for official work.  It may be interesting to know that most of the organizations abroad (e.g. in Japan) do not have official cars even for their Chairmen.  Most of them either walk down to places of their work if they are nearby or use public transport like metro, bus or taxi to reach their office. 

Cut Transport Costs

True, our public transport system needs to be improved, but given the political will this is not a Herculean task.  Similarly the Government expenditure on telephones, electricity etc can be reduced considerably through suitable measures.

Thus, it is high time the Government introduces appropriate policies and takes suitable steps to reduce the size of the bulging bureaucracy and cut down expenditure on stationery, transport, committee meetings etc. to reduce the cost of administration and divert the funds to more purposeful activities like education and health. ---- INFA

(Copyright India News & Feature Alliance)