REPORT OF THE SECOND PAY COMMISSION Royal Government ...

REPORTOF

THE SECOND PAY COMMISSION

Royal Government of BhutanMarch, 2014

Report: The second Pay commission of Bhutan

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1 EXECUTIVE SUMMARY ..................................................................................... 1

2 BACKGROUND................................................................................................... 6

2.1 Establishment of the Pay Commission ......................................................... 6

2.2 Composition of Members ........................................................................... 6

2.3 Secretariat for the Commission from the Ministry of Finance ...................... 6

2.4 Tenure and Terms of Reference ................................................................... 6

3 GUIDING PRINCIPLES ..................................................................................... 8

3.1 Objectives............. ..................................................................................... 8

3.2 Principles.............. ..................................................................................... 8

4 METHODOLOGY........... ..................................................................................... 9

5 CURRENT ECONOMIC SITUATION ................................................................... 10

5.1 Real Sector............ ..................................................................................... 10

5.1.1 Investment............. ..................................................................................... 11

5.1.2 Consumption .................................................................................... 11

5.1.3 Consumer Price Index (CPI) .............................................................. 12

5.1.4 Household Consumption Expenditure .............................................. 13

5.1.5 Housing....... ..................................................................................... 13

5.2 Fiscal Sector. ......... .................................................................................... 16

5.2.1 Domestic Revenue ........................................................................... 17

5.2.2 Expenditure ..................................................................................... 18

5.2.3 Public Debt ..................................................................................... 18

5.3 Monetary Sector ..................................................................................... 19

5.3.1 Money Supply and Credit ................................................................. 19

5.3.2 Interest Rates .................................................................................... 20

5.4 External Sector ..................................................................................... 21

5.5 Impact of Current Economic Situation on Real Income ............................. 22

TABLE OF CONTENTS


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6 FISCAL SPACE ..................................................................................... 23

6.1 11th FYP Projection .................................................................................... 23

6.2 Medium Term Fiscal Framework (MTFF) as of December 2013 .................. 23

6.3 Expenditure Rationalization ....................................................................... 25

6.4 Revenue Enhancement ............................................................................... 25

7 GROwTH TRENDS: CIVIL AND PUBLIC SERVICE .............................................. 27

7.1 Civil Service ..................................................................................... 27

7.2 Other Public Service .................................................................................. 29

8 RECOMMEnDaTIOn FOR REvISIOn OF PaY anD allOwanCES .................. 30

8.1 Salary Revision: Reference Period .............................................................. 30

8.2 Prime Minister, Cabinet Ministers and Equivalent Post Holders ................. 30

8.3 Members of Parliament .............................................................................. 33

8.4 Holders, Members and Commissioners of Constitutional Bodies ............... 33

8.5 Privy Council ..................................................................................... 35

8.6 Office of Attorney General ........................................................................ 36

8.7 Other Public Servants (GSP, ESP, NFE, RAPA, LG, Para,

Consolidated Contract) .............................................................................. 36

8.7.1 General Service Personnel (GSP) and Elementary

Service Personnel (ESP) ..................................................................... 36

8.7.2 Non-Formal Education (NFE) Instructors ........................................... 37

8.7.3 Consolidated Contract (mainly Teachers) .......................................... 37

8.7.4 Royal Academy of Performing Arts (RAPA) ........................................ 38

8.7.5 The Local Government ..................................................................... 38

8.8 Civil Servants ..................................................................................... 40

8.8.1 Compression Ratio ........................................................................... 41

8.9 Personal Income Tax (PIT) .......................................................................... 43

9 ALLOwANCES AND BENEFITS ........................................................................... 44

9.1 lumpsum allowances ................................................................................. 44

9.1.1 Red Scarf Allowance ......................................................................... 44

9.1.2 Patang Allowance ............................................................................. 44


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9.1.3 High Altitude Allowance ................................................................... 45

9.1.4 Difficulty Area Allowance ................................................................. 45

9.1.5 Uniform Allowance .......................................................................... 46

9.1.6 Radiation Allowance ........................................................................ 47

9.1.7 Cash Handling Allowance ............................................................... 47

9.1.8 Overtime Allowance ......................................................................... 47

9.1.9 Communication Allowance .............................................................. 48

9.1.10 Leave Encashment (LE) .................................................................. 48

9.1.11 Leave Travel Concession (LTC) ....................................................... 48

9.2 Salary Based allowances ............................................................................ 48

9.2.1 Professional Allowance ..................................................................... 49

9.2.1.1 Professional Allowance for Medical ....................................... 49

9.2.1.2 Professional Allowances for Teaching ..................................... 49

9.2.1.3 Scarcity Allowance for Mathematics and Physics Teachers ..... 50

9.2.1.4 Professional Allowance for Royal Audit Authority ................... 50

9.2.1.5 Professional Allowances for Anti-Corruption Commission ...... 51

9.2.1.6 Professional Allowance for

Department of Civil Aviation (DCA) ...................................... 51

9.2.2 House Rent Allowances for Civil and Public Servants ....................... 51

9.2.3 House Rent Allowance for other Civil and Public Servants ................ 53

9.2.4 Officiating Allowance ....................................................................... 54

9.3 Discretionary Grants .................................................................................. 54

9.4 Foreign Service Entitlements ...................................................................... 54

9.5 Travelling allowance .................................................................................. 55

9.5.1 Daily Allowance (DA) – In-country ................................................... 56

9.5.2 Daily Subsistence Allowance (DSA) in India ..................................... 58

9.5.3 Daily Subsistence Allowance (DSA) for

Countries Other Than India (COTI) .................................................. 59

9.5.4 Travel Allowance (TA) ....................................................................... 60

9.5.5 Porter and Pony Charges ................................................................... 60


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9.5.6 TA/DA of Local Community Leaders ................................................. 61

9.5.7 Carriage charge of personal effect ..................................................... 62

9.6 Tax Free vehicle Quota for Public Servants ................................................ 62

9.7 Non-Monetary Benefits (NMBs) ................................................................. 66

10 GOVERNMENT POOL VEHICLE ......................................................................... 68

11 POST SERVICE BENEFITS .................................................................................... 72

11.1 PuBlIC SERvICE PEnSIOn BEnEFIT ........................................................ 72

11.1.1 Introduction .................................................................................. 72

11.1.2 Pension benefit payout and benefit level ........................................ 72

11.1.3 Impact of pay consolidation or pay revision .................................. 73

11.1.4 Cost of pay revision on the sustainability ....................................... 73

11.2 Measures to Enhance the Sustainability of Pension Plan ............................ 74

11.2.1 Reconsideration of Pension Formula based

on 24 months average salary ............................................................ 74

11.2.3 Suspension of pension on re-employment ..................................... 75

11.2.4 National voluntary savings scheme ................................................ 75

11.2.5 Home Ownership Program for the members ................................. 75

11.3 Gratuity................. ..................................................................................... 76

11.4 Early Retirement Scheme (ERS) .................................................................. 76

11.5 Special Retirement Scheme (SRS) .............................................................. 77

11.6 Group Insurance Scheme (GIS) .................................................................. 77

12 IMPLICATION ON CORPORATE AND OTHER SECTORS ................................... 79

12.1 Background .............. ............................................................................... 79

12.2 SOEs under Ministry of Finance (MoF) ...................................................... 79

12.3 Druk Holding & Investments (DHI) ........................................................... 79

12.4 DHI Owned Companies (DOCs) ................................................................ 80

12.5 Spiraling Effect of Public Service Salary Revision on Corporate Sector ..... 80

12.5.1 Effect on SOEs under MoF ............................................................. 80

12.5.2 Effect on DHI and DOCs ............................................................... 81

12.6 Royal Monetary authority of Bhutan (RMa) .............................................. 81


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12.7 Financial overview of the Corporate Sector ............................................... 81

12.8 Private Sector......... .................................................................................... 82

13 IMPACT OF SALARY REVISION .......................................................................... 84

13.1 annual Financial Implication ..................................................................... 84

13.2 Financing Pay and allowance Revision ....................................................... 85

13.3 Fiscal Projection after Revisions ................................................................. 86

13.3.1 Domestic revenue ......................................................................... 87

13.3.2Current Expenditure ......................................................................... 87

13.3.3 Public debt .................................................................................... 87

13.3.4 Inflation ..................................................................................... 88

13.3.5 Other Fiscal & Economic Projections ............................................ 88

14 IMPLEMENTATION OF NEw PAY STRUCTURE .................................................. 89

15 GENERAL RECOMMENDATIONS ....................................................................... 90

15.1 Recommended Fiscal Measures .................................................................. 90

15.1.1 Revenue Enhancement Measures .................................................. 90

15.1.2 Measures on Expenditure Rationalization ...................................... 90

15.2 Cost of living adjustment (COla) ............................................................. 91

15.3 Performance Based Incentives ................................................................... 92

15.4 Independence of Constitutional Bodies from RCSC ................................... 92

15.5 Other General Recommendations .............................................................. 92

16 ACKNOwLEDGEMENT ..................................................................................... 94

17 ANNEXURES ..................................................................................... 95

The Second Pay Commission

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1 EXECUTIVE SUMMARY

The Second Pay Commission was established under a Government Executive Order No. C-2/9/153 dated 13th November 2013. As per Section 2, Article 30 of the Constitution of Bhutan, the Pay Commission is to recommend “revisions in the structure of the salary, allowances, benefits, and other emoluments of the Royal Civil Service, the Judiciary, the members of Parliament and Local Governments, the holders and members of constitutional offices and all other public servants with due regard to the economy of the Kingdom and other provisions of this Constitution”.

While it was not possible to cover each and every organization, the Second Pay Commission consulted as many agencies as possible for their views and suggestions on the revision of pay and allowances. A website (www.secondpaycommission.gov.bt) was established to seek public views on the revision of salary, allowances, pool vehicles and vehicle quota system amongst others through forum discussions and emails. The Commission further received a number of unsolicited suggestions and representations.

The Commission began its work by taking a close look at the financial affordability and the implications that a pay revision could have on the overall economy of the country; especially considering the recent economic slowdown, the shortage in the availability of Indian Rupees in the market, and likely delays in the completion of some of the mega hydropower projects affecting projected domestic revenues. In this regard, the Commission was mainly guided by the provision in the Constitution that “the Government shall ensure that the cost of recurrent expenditures is met from internal resources of the country”. The Commission considered a number of cost cutting measures and expenditure rationalization including the overarching need to contain the growth in the size of the civil service to within manageable limits into the foreseeable future.

Through extensive rationalization of both domestic revenues and current expenditures as projected in the 11th FYP, sufficient fiscal space was created for a pay revision to cover at least the income erosion since the last salary revision, which was in the form of a lumpsum salary allowance that became effective January 2011. Apart from ensuring that all current expenditures are met through domestic revenues, the recommendations of the Commission are in keeping with the 11th FYP target of meeting at least 85 percent of all current and capital expenditures from domestic revenues by the end of the Plan period.

Some of the main recommendations of the Commission are as follows:

Pay:

i. The salary and other benefits of the Civil Service, the Judiciary, the Members of the Parliament and Local Governments, the Holders and Members of Constitutional Offices and all other Public Servants are revised to protect against income erosion as measured in the CPI since 2011. A minimum of a 20 percent revision in salary

1 EXECUTIVE SUMMARY


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from the 2011 salary levels is therefore recommended.

ii. The pay scales of some of the key positions such as the Prime Minister, Speaker of the National Assembly, Chief Justice of Bhutan, Ministers and Constitutional Post Holders are restructured from the 2011 salary levels.

iii. For categories of public servants that did not receive the lumpsum salary allowances in 2011, the provisioning for the lumpsum salary allowance at rates consistent with the 2011 percentages is also recommended.

allowances:

Salary Based Allowances:

i. To continue with the existing allowances since the earlier consideration based mainly on scarcity has not changed, but to convert them to lumpsum allowances at the 2011 salary levels.

ii. To continue with discretionary grants but make such grants taxable as with all such incomes and to ensure transparency in the use of the grants.

iii. To make allowances of teachers and lecturers with Masters and PhD degrees at par with Doctors in the medical profession.

iv. To introduce allowances at par with the RAA for the internal auditors of various agencies.

v. To introduce lumpsum allowances of 25-45 percent of 2011 salary levels specifically for the Airworthiness and Flight Operations Officers of the Department of Civil Aviation.

vi. To rationalize difficulty allowances to encourage public servants to take up rural postings.

House Rent Allowance:

i. The consolidated salary structure introduced in 1988 incorporated all previous allowance including housing allowance. Since then purchasing power is being restored to the year of each pay revision. It is recommended not to introduce house rent benefits for any new categories of the civil and public services.

ii. At the national level, the average expenditure on housing constitutes 20 percent of the salaries of civil and public servants as per the assessment of the National Statistics Bureau. Affordable housing is a major challenge, particularly for the low income groups and in places like Thimphu and Phuentsholing. It is recommended that the government urgently invest in NHDC, NPPF and other relevant agencies to increase the stock of low income housing wherever required.


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iii. For those public servants who are presently entitled to the housing allowances under various Acts and rules and regulations, it is recommended to apply a uniform house rent allowance of 20 percent of basic pay. Where government housing is provided, this allowance will not apply.

Travel Allowance:

i. Civil and public servants should not have to face undue hardships while traveling on duty. It is recommended to appropriately revise all allowances related to travel (in-country and ex-country). At the same time, it is recommended that expenditures on travel must be controlled and overall travel budget for the government be kept within a maximum ceiling of 15 percent of the budget for pay and allowances. The overall expenditure on travel due to enhanced travel allowances is not expected to be an additional burden to the exchequer with the budget ceilings and control mechanisms.

ii. Existing rules on exceptions to the TA/DA rates should be withdrawn immediately.

iii. The “dholam” and porter pony systems for in-country travel needs immediate rationalization.

Benefits:

Post Retirement Benefits:

i. For the sustainability of the Pension Fund, which is guaranteed by the government, it is recommended that the basis for pension calculation be “the average of the basic pay for the last 24 months” and not as stipulated now as the “last pay”.

ii. Pension payment should be suspended for those public servants on being appointed and/or elected to any posts for which remunerations are paid through public funds.

iii. It is recommended that one ceiling for gratuity be applicable for all public servants, the vesting period be removed, and the maximum ceiling be enhanced to Nu. 1.5 million.

Government Pool Vehicles:

i. It is recommended that, henceforth, designated pool vehicles be provided only to the Prime Minister, Cabinet Ministers, Chief Justice of Bhutan, Speaker of the National Assembly, Chairperson of the National Council, Leader of the Opposition, and Dzongdags.

ii. For others that are presently entitled to designated vehicles as per relevant Acts and rules and regulations, a similar arrangement as provided for the Members


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iii. of Parliament (a one-time Nu 700,000 grant towards purchase of vehicle on appointment and monthly allowances for driver and maintenance) is recommended.

iv. It is recommended that the government do away with the Pool Vehicle system in its entirety and create a corporate entity to manage these pool vehicles. The corporate entity thus created should rent and provide the transportation services at a fee to government agencies requiring such services. This could be immediately implemented for Thimphu and then rolled out to the rest of the country.

vehicle Quota System

i. A civil servant on reaching a certain grade in the system is eligible for vehicle quota every seven years for which there are certain exemptions of taxes for import of the vehicle. It is recommended that the vehicle quota be monetized through payment of Nu. 160,000 whenever the quota becomes due. This will also be applicable to other public officials who are entitled to vehicle quota.

ii. Public servants who are provided designated pool vehicles by virtue of their positions and responsibilities will neither be entitled to the vehicle quota nor the one-time grant of Nu. 700,000 towards purchase of vehicle and the driver and maintenance allowances.

iii. Unused vehicle quotas of the public servants shall be monetized at Nu. 160,000.

Foreign Services Entitlements

i. It is recommended that a number of the foreign services entitlements like home leave passage, furnishing and transfer of personal effects be allowed to be monetized as it would benefit both the individuals as well as the exchequer.

ii. It is recommended that all foreign entitlements be denominated in the local currency so that exchange rate fluctuations do not affect the individuals.

Non-Monetary Benefits

i. It is recommended for introducing a number of Non-Monetary Benefits to help attract, retain and motivate public servants. The more significant recommendations are to increase maternity and paternity leave periods, introduce leave in case of miscarriages, and provision of space for crèches in government agencies.

Other Recommendations

i. It is recommended that a National Saving Scheme (NSS) be introduced to take advantage of pay revision opportunities. The NPPF and other Financial


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Institutions should implement this scheme. This is important in the current economic scenario, as this will ensure that not all the pay revision goes towards consumption and further promote a savings culture.

ii. The Commission also makes a number of recommendations to enhance revenues, and rationalize expenditures that have a direct bearing on the government’s ability to ensure fiscal sustainability while providing high quality services by attracting, retaining and motivating public servants.

The Commission recommends that the efforts of the government to “link pay to performance” be expedited. These efforts should be preceded by a comprehensive Organizational Development (OD) exercise with detailed studies and consultations so that a credible performance management system to support the linkage could be established and implemented. While in the interim period, pay revisions might be driven by inflation and consumer price indices, future pay revisions and in particular real pay increases must be driven by productivity and the economic situation of the country.

The successful implementation of the recommendations of the Second Pay Commission will require the amendment of a number of provisions in the laws relating to pay, allowances and service benefits: specifically those provisions in the Judicial Services Act; the Parliamentary Entitlements Act; the Entitlement Act for Holders, Members and Commissioners of Constitutional Offices; the Bhutan Civil Service Act; and the Labour and Employment Act and the supporting rules and regulations. It is also recommended that the Pension Policy and Pension Bill be passed at the earliest.

In keeping with the constitutional provisions, the recommendations of the Commission are to be implemented on approval of the Lhengye Zhungtshog and subject to such conditions and modifications as may be made by the Parliament. From amongst the recommendations of the Commission, the rationalization of the “dholam” system would have to precede the implementation of the proposed enhancements of the in-country travel and difficulty allowances.

The recommendations of the Commission are recommended to be effective from 1st July 2014.


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2 BACKGROUND

2.1 Establishment of the Pay Commission

In keeping with Article 30 of the Constitution of Bhutan and as approved by His Majesty the King on the recommendation of the Lhengye Zhungtshog, the Second Pay Commission was established through an Executive Order No. C-2/9/153 dated 13th November 2013 (Annexure 1).

2.2 Composition of Members

The Commission comprised of the following Members:

1. Dasho Chhewang Rinzin, Managing Director, Druk Green Power Corporation (Chairperson)

2. Tshering Dorji, Secretary, Ministry of Home and Cultural Affairs

3. Lam Dorji, Secretary/Nim Dorji, Joint Secretary, Ministry of Finance

4. Karma Tshiteem, Secretary, Gross National Happiness Commission

5. Dubthob Wangchug, Chief Executive Officer, National Pension & Provident Fund

6. Kuenzang Dechen, Jajin Consultancy/Thinley Wangchuk Dorji, Chief Executive Officer, Bhutan Tourism Corporation

7. Ugyen Norbu, Chief Research Officer, National Statistics Bureau

2.3 Secretariat for the Commission from the Ministry of Finance

1. Sonam Tenzin, Deputy Chief Planning Officer, Policy & Planning Division

2. T.N.Sharma, Officiating Chief Budget Officer, Department of National Budget

3. Rinzin Dorji, Sr. Planning Officer, Policy & Planning Division

4. Tshering Dorji, Sr. Statistical Officer, Policy & Planning Division

2.4 Tenure and Terms of Reference

As per the Executive Order, the tenure of the Commission was for a period of three months, which was subsequently extended for another month.

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The following were the Terms of Reference for the Commission:

1) To recommend revisions in the structure of the salary, allowances, benefits and other emoluments for the following categories of employees:

i. Civil Servants,

ii. Judiciary,

iii. Members of Parliament,

iv. Local Governments,

v. Members of Constitutional Offices, and

vi. Other Public Servants.

2) The Executive Order also mandated the Commission to review and recommend in respect of the following specific areas:

i. Introducing housing allowance for civil servants;

ii. Revising the salary and other benefits of local government officials;

iii. Introducing rural posting allowance for civil servants, especially teachers;

iv. Reviewing the foreign service entitlement rules;

v. Reviewing the feasibility and implications of discontinuing the government pool vehicles system and replacing it with a system of allowances;

vi. Lifting the vehicle quota for all civil servants and alternatives thereto; and

vii. Reviewing the recommendations of the First Parliament with regard to the revised pay scale for the Prime Minister and Ministers.


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3 GUIDING PRINCIPLES

3.1 Objectives

The Commission considered it’s Terms of Reference and the recommendations are being made with the following main objectives:

i. To attract and train, and to motivate and retain the best officers within the public service;

ii. To promote meritocracy and excellence at all levels of the public service;

iii. To strengthen and link pay to performance;

iv. To promote equitable pay for similar services;

v. To protect salary income against erosion;

vi. To provide decent post service benefits; and above all

vii. To strive towards a “small, compact, efficient and effective” public service.

3.2 Principles

While the basic principles of any pay revision should be to attract, retain and motivate the best and brightest public servants, the recommendations, in keeping with the Terms of Reference, were considered within the following broad macroeconomic parameters:

i. Fiscal sustainability: Ensure that the proposed salary revision does not undermine the long term fiscal sustainability and economic stability of the country, and is in keeping with the relevant provisions of the Constitution.

ii. Expenditure rationalization: Any upward salary revision recommended is met largely through rationalization of expenditures such as cost cutting and other measures.

iii. Spiraling effect: Be mindful of the spiraling effect on the salaries of the private, corporate and other sectors in the country that could negatively impact the economy.

iv. Macro-economic impact: Consider the impact of salary revision on inflation, reserves and balance of payments.

v. Promote a savings culture: Consider ways to inculcate a culture of savings and investments among the public servants.

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4 METHODOLOGY

In carrying out its mandate, the Commission adopted the following methods and approaches:

i. Review of the First Pay Commission Report;

ii. Review of relevant acts, policies, rules and regulations, guidelines, and relevant executive orders pertaining to public servants’ salary and benefits;

iii. Review of existing pay structures of the civil servants and their trends;

iv. Review of pay structures and salary revisions of other countries;

v. Analysis of the attrition rates in the public service and reasons thereof;

vi. Review of the Consumer Price Index (CPI), specifically relating to purchasing power of salary income;

vii. Use of quantitative tools such as central tendency and measure of variation to analyze the salary in terms of its levels and distribution;

viii. Consultations with relevant stakeholders (list of agencies that the Commission met attached at Annexure 2); and

ix. Wide levels of feedback through media and other means.

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5 CURRENT ECONOMIC SITUATION

The Commission took stock of the current macroeconomic situation of the country to assess as to whether the Government could afford a revision in the public servants’ pay and allowances, and if so to what extent. In doing so, the Commission reviewed the performances of the real, fiscal, monetary and external sectors; particularly to see the impact of the earlier revisions in pay and allowances on the economy.

5.1 Real Sector

In the 10th FYP period, the economy grew steadily at an average of 7.4 percent, largely driven by the accelerated development of the hydropower sector. The growth increased from 5.7 percent in FY 2008-09 to 9.3 percent in FY 2009-10 to 10.1 percent in FY 2010-11. The public servants’ salary revision in 2009 (35 percent revision) contributed mainly to growth in the service sector, which grew by 23.6 percent and constituted about 12 percent of GDP. Similarly, in FY 2010-11 the social and general government grew by 16.9 percent and share to GDP increased to 13 percent when public servants were given lumpsum salary allowance in 2011. The growth however decelerated to 6.5 percent in FY 2011-12 and in FY 2012-13 to 5.2 percent, mainly due to measures initiated to correct the imbalances in the external sector.

Figure5.1:Gross Domestic Product (GDP)

In terms of GDP share in the 10th FYP, the industry sector dominated with an average share of 41 percent followed by service sector with 37 percent and agriculture sector with 17 percent. The impressive growth in industry sector was propelled by the ongoing construction of a number of large hydropower projects. The persistent low growth in agriculture sector is indicative of the limited scope in expansion of the sector although substantial resources are being endowed to the sector.

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5.1.1 Investment

During the 10th FYP, on an average, investments grew annually by 19.5 percent. Domestic capital formation however declined during the last two fiscal years of 10th FYP, as there were no new investments in the hydropower sector and also due to the winding up of the 10th FYP activities.

During the same period, while Government investments grew steadily, private sector investments actually declined mainly on account of the restrictions on loans for real estate development.

Figure 5.2: Investment

5.1.2 Consumption

Total consumption increased from Nu. 39.2 billion in FY 2008-09 to Nu. 64.6 billion at the end of 10th FYP largely driven by private consumption. Private consumption constituted about 65 percent of the total consumption while the government consumption constituted the balance 35 percent. During FY 2008-09 and FY 2010-11, government consumption witnessed higher growths due to salary revisions. The share of consumption to GDP is 65 percent, which is higher than the share of investment.

Figure 5.3: Consumption


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The consumption expenditures varied directly with change in disposal incomes. The average propensity to consume (APC) decreased as income increased reflecting that the rate of increase in consumption was less than the rate of increase in income. At certain point in time, the average propensity to consume decreased with rise in income, and the marginal propensity to consume (MPC) although positive was less than one. The mean APC for the 10th FYP was 0.65 indicating that about two third of the income was consumed reflecting a low national savings rate.

Table 5.1: Income and Consumption

YearGross Disposable Income

(Nu. in millions)

Consumption

(Nu. in millions)APC MPC

2008/09 61,371 39,157 0.64 0.572009/10 67,708 45,784 0.68 1.052010/11 78,382 51,661 0.66 0.552011/12 92,569 59,414 0.64 0.552012/13 103,989 64,607 0.62 0.45

5.1.3 Consumer Price Index (CPI)

The Consumer Price Index (CPI) for Bhutan is based on the movement of prices in the 20 Dzongkhags and the two major Thromdes of Thimphu and Phuentsholing with a total 557 sample outlets, and using 2003 as the base year. The CPI increased to 180.5 by 2012, of which food items (weight: 31.67) index increased to 206.9 and non-food items (weight: 68.33) index increased to 168.2.In 2013, the index was reset based on the Bhutan Living Standard Survey (BLSS) of 2012. The CPI index for food increased to 115.49 and non-food index rose to 109.44 by the end of 2013. The highest inflation at 10.9 percent was recorded in 2012 mainly due to the high inflation in food items that hovered at around 14 percent while for non-food items; the inflation was at around 9.3 percent. The average inflation for the period 2008-2013 was 8.02 percent.

Table 5.2: Inflation

Year Average 2008 2009 2010 2011 2012 2013

Food 11.89 9.03 8.85 10.19 13.95 8.63

Non-food 6.62 2.12 6.11 8.14 9.26 8.49

Overall 8.30 4.41 7.02 8.86 10.93 8.58Source: National Statistics Bureau (NSB)


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5.1.4 Household Consumption Expenditure

According to the Bhutan Living Standard Survey 2012, the mean monthly household consumption expenditure was Nu. 18,367, of which 38.9 percent accounted for food expenditures and 61.1 percent was for non-food expenditures. Within food items, the top four expenditure shares were for dairy products at about 20.4 percent, followed by rice (14.7 percent), vegetables (14.2 percent), and other cereals and pulses at 10.3 percent. Of the 61.1 percent for non-food expenditures, house rent accounted for 19.2 percent, transport and communication (18.1 percent), and clothing and footwear at 12.4 percent.

Bumthang, Chhukha, Gasa, Haa, Paro, Punakha, Thimphu and Wangdue Phodrang had monthly mean household consumption expenditures that were above the national average of Nu. 18,367. Some 60 percent of the civil and public servants are posted in these Dzongkhags. The highest monthly mean household consumption expenditure was reported in Gasa at Nu. 35,650 and lowest was in Dagana at Nu. 11,381.

Figure 5.4: Monthly household consumption expenditure

Source: BLSS, 2012

5.1.5 Housing

As per BLSS 2012, less than two thirds of the households (60 percent) in the country own their own dwellings. Of this, only about 16.6 percent of the urban households own their own dwellings. In contrast, 83 percent of the rural households live in their own dwellings. Pema Gatshel has 91 percent of the households owning their own homes, while the figure is only 19 percent for Thimphu. Other Dzongkhags like Chhukha (43 percent), Sarpang (52 percent) and Paro (58 percent) are amongst those with dwellings ownership below the national average.

Private individuals are the largest provider of urban housing stock comprising of nearly 43 percent, followed by the government at 14 percent, and the public corporations at 4 percent.


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Figure 5.5: Distribution of households by tenure status, housing provider and area (in percent)

Under non-food items, housing has a weightage of 18.8 percent and the average annual inflation under the housing component during 2008-2013 was recorded at 6.2 percent. As per the BLSS 2012 survey, the national mean monthly house rent was Nu. 3,313. The survey covered 63 towns for assessment of the monthly house rents.

Figure 5.6: Mean Monthly Rent (national average Nu. 3,313)

Source: NSB

The highest average rent of Nu. 9,296 was reported at Rurichhu under Wangdue Phodrang with the lowest average rent of Nu. 474 per month reported at Kheri Gonpa under Pema Gatshel. Civil servants in Thimphu, Punakha and Wangdue Phodrang (52 percent of the civil servants) are exposed to house rents above the monthly mean national house rent of Nu. 3,313.

The BLSS 2012 also reported on rents in various locations within the urban area of Thimphu.


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The highest rent was reported in Upper Motithang followed by the core town and Lungtenphu areas, while lowest rents were reported in the Changjiji, Dechencholing and Taba areas. The mean monthly rent in Thimphu is Nu. 5,014, which is 52.2 percent higher than the national mean monthly rent.

Figure 5.7: Thimphu Monthly Rent (mean rent: Nu. 5,051)

In urban Phuntsholing, the mean monthly house rent as per BLSS 2012 was Nu. 4,207, which is 17.7 percent higher than the monthly national mean. The highest rent was reported in the Vegetable Market area with a mean monthly rent of Nu. 5,880 while the lowest mean monthly rent of Nu. 1,889 was reported at Kharbandi.

Figure 5.8: Phuntsholing Monthly Rent (mean rent: Nu. 4,027)


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Since the salary revision in 2011, the rental inflation over the two years period was 14.8 percent. Assuming that the same level of inflation to continues, the rental inflation is expected to touch 22.2 percent by June 2014.

Figure 5.9: National Rent Inflation

The weighted mean salary of the civil servant is Nu. 16,167, which corresponds to the salary at P5 level. The monthly average rent of Nu. 3,313 as per the BLSS 2012 survey thus constitutes 20 percent as a percentage of the P5 level salary.

5.2 Fiscal Sector

With prudent fiscal management, deficit was contained to at an average of 0.1 percent of GDP during the 10th FYP. During the initial two years of the plan period there was fiscal surplus of 1.9 percent and 1.6 percent of GDP respectively. In FY 2010-11, the deficit was 2.1 percent and for the remaining period of the 10th FYP, the deficit was about 1 percent of GDP.

The revenue deficit1 increased from 11.8 percent of GDP in FY 2008-09 to 17.3 percent of GDP by the end of the 10th FYP. While domestic revenues adequately covered current expenditures, the average revenue deficit during the 10th FYP stood at 15 percent of GDP.

Figure 5.10: Fiscal Position

1. Domestic revenue less total expenditure


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5.2.1 Domestic Revenue

Tax revenues contributed to a major component of domestic revenues constituting about 14 percent of GDP and out-performed non-tax revenues. On an average, tax revenues increased by 25 percent while non-tax revenue witnessed a negative 4 percent growth. The decrease in non-tax revenues was mainly on account of the corporatization of the Tala project. Prior to corporatization, the Tala project transferred its earnings as non-tax revenues prior to the government. The decline in transfers from RMA and the closure of Bhutan Lottery also contributed to the lower growth in non-tax revenues.

Figure 5.11: Revenue Trend

The combined effects on the non-tax revenues through temporary spikes in profit transfers, the upturn in interest payments and the steady downward trend in dividends declared by the SOEs resulted in a decline in the share of non-tax ratio to GDP. Nevertheless, both the direct and indirect tax ratios to GDP increased in the 10th FYP. The changes in the direct tax ratios were dominated by CIT. The upward trends in the PIT and BIT and the relatively stable path of the “other” direct tax ratio also contributed to the steady growth in the overall direct tax revenues.

The increase in PIT was partially from salary revisions with the number of salaried income tax payers increasing by 30 percent in FY 2009-10 and by 14 percent in FY 2011-12. The PIT revenue grew by 46.3 percent in FY 2009-10 and 31.3 percent in FY 2011-12.

Figure 5.12: Trends in Direct and Indirect Tax Ratios to GDP (%)


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5.2.2 Expenditure

The capital expenditure increased annually by 16.3 percent and current expenditure by 13.9 percent during the 10th FYP. With growth in the number of public servants and increases in their remunerations, the share of pay and allowances to current expenditure increased to 43 percent in 10th FYP as against 40 percent in 9th FYP. During the salary revisions in FY 2009-10 and FY 2010-11, pay and allowances constituted 45 percent of the current expenditures.

Figure 5.13: Expenditure Trend

During the 10th FYP, domestic revenues covered all current expenditures and financed 20.4 percent of capital expenditures.

Figure 5.14: Coverage of expenditure by domestic revenue

5.2.3 Public Debt

The total public debt increased from Nu. 40.58 billion in FY 2008-09 to Nu. 98.74 billion by the end of 10th FYP. Hydropower debt accounted for Nu. 54.51 billion.

On an average, interest payments constituted 13.3 percent of the current expenditure. Debt service ratio increased from 13.6 percent in FY 2008-09 to 17.2 percent in FY 2012-13.


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Figure 5.15: Public Debt

Source: Ministry of Finance

5.3 Monetary Sector

5.3.1 Money Supply and Credit

There was an increase of 24.6 percent in broad money (M2) in FY 2008-09 compared to 2.3 percent in the previous year. The increase was attributed to growth in net foreign assets by about 25 percent. M2 increased significantly in the first three years of the 10th FYP due to the significant growth in private sector credit, but experienced negative growth in 2012 due to a number of monetary interventions.

On an average, the total domestic credit during the 10th FYP increased by 32 percent, largely driven by the rapid expansion of private sector credit. In terms of GDP, the total domestic credit was about 41 percent, which is almost entirely credited to the private sector.

Table 5.3: Money Supply

Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13

% change

Broad Money, M2 2.3 24.6 30.1 21.2 (1.0) 18.6

Total Domestic Credit 32.8 21.7 42.3 32.7 51.3 12.8

Claims on Government 17.8 86.7 (5.0) 32.1 (131.5) 166.7

Private sector credit 35.8 28.9 40.7 29.4 30.1 7.1

Domestic credit as % of GDP

Broad Money, M2 55.40 62.49 64.07 54.93 58.20

Total Domestic Credit 28.05 34.60 38.85 50.92 51.33

Claims on Government -5.43 -4.48 -5.00 1.37 3.25

Private sector credit 31.86 38.88 42.54 47.93 45.84Source: RMA


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In terms of credit share by sector, construction sector accounted for 26 percent followed by manufacturing (17 percent) and personal (16 percent). Although there was rapid domestic credit expansion during the 10th FYP, there was minimal benefit to the agriculture and transport & communication sectors in terms of access to credit.

Table 5.4: Credit by sectors

2008/09 2009/10 2010/11 2011/12 2012/13

(percent of total credit)

Agriculture 2.71 1.65 1.62 2.18 2.67

Service & Tourism 13.10 14.62 12.03 12.01 11.74

Manufacturing 19.38 17.08 17.45 15.26 17.91

Building & Construction 25.03 25.58 25.31 26.47 26.25

Trade & Commerce 17.44 15.99 14.29 8.31 11.89

Transport & Communication 6.25 7.72 9.95 9.52 6.59

Personal Loans 13.88 15.29 16.03 16.25 17.64

Loan Against Shares 0.61 0.68 0.63 1.02 0.98

Government (Short term loans) 0.00 0.00 0.00 0.00 2.39

Credit Card 0.00 0.00 0.02 0.01 0.01

Others* 1.58 1.39 2.68 8.99 1.93Source: RMA

5.3.2 Interest Rates

The lending rates ranged between 9 to 16 percent while deposit rates ranged between 4.5 to 8 percent during the 10th FYP with a spread of about 8.5 percent. Since interest rates on deposits were significantly lower than the average annual inflation, this could have dis-incentivized savings.

Table 5.5: Lending rates

Years 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12

Average Lending Rate (9-16) (9-16) (9-16) (9-16) (9.75-16) (10-16)

Average Deposit Rate (4.5-7) (4.5-7) (4.5-7) (4.5-8) (4.5-8) (4.5-8)

Source: RMA


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5.4 External Sector

The current account deficit deteriorated as a result of widening trade deficit with imports increasing by 17 percent annually against annual increases in exports of only 5 percent during the 10th FYP period leading to further aggravation in the shortage of Indian Rupees in the economy. Capital inflows in the form of loans and grants helped to maintain positive overall balance of payments.

Figure 5.16: Balance of Payments

Source: RMA

The current account deficit in terms of GDP deteriorated from 1.1 percent in FY 2008-09 to 17.1 percent of GDP at the end of the 10th FYP. During the same period, the trade deficit increased from 7.5 percent of GDP to 25.1 percent of GDP.

Although there is a shortage of Indian Rupee in the economy, the Gross Reserves increased from US$ 704 million in FY 2008-09 to US$ 951 million by the end of the 10th FYP. The accumulation of the reserves was largely on account of the loans and grants received from the development partners over the years. However, the gross reserves as “month of imports” decreased from 12.4 months in FY 2008-09 to 9.8 months in FY 2012-13.

Figure 5.17: Gross International Reserves

Source: RMA


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5.5 Impact of Current Economic Situation on Real Income

The impact of the revisions of public servants’ pay and allowances during the 10th FYP on the economy were not very significant as the revisions were implemented in a phased manner with the overall increase aggregating to 55 percent on the 2006 Pay Scale (a 35 percent pay revision in January 2009 and a lumpsum salary allowance in January 2011).

During the 10th FYP, food items contributed to 46 percent of inflation and non-food items contributed to the balance 54 percent. During the same period, rental inflation was 29 percent. The 2 percent annual salary increment has not been able to safeguard the inflation induced income erosion. While the salary income of the public servants eroded by 44 percent in the last five years (2008-2012), the real income erosion since the implementation of the lumpsum salary allowance in 2011 till June 2014 is estimated at 20.1 percent.

An upward revision of pay and allowances is therefore necessary and recommended to make up for this erosion in income.

Figure 5.18: Income Erosion


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6 FISCAL SPACE

Bhutan is faced with major economic challenges at the present juncture with the government putting in place a number of monetary and fiscal measures to improve the situation. The Commission took a close look at the state of the economy, and at the macroeconomic impact and fiscal sustainability that any upward revision of pay and allowances of public servants would entail. The fiscal projections for the 11th FYP and the underlying assumptions were scrutinized so as to ensure that the recommendations of the Commission are prudent and did not deviate from the sustainable fiscal path besides ensuring the constitutional requirement for recurrent expenditure to be covered by domestic revenues. The Commission also considered the fiscal policy target of covering at least 15 percent of capital expenditure in the budget report of FY 2013-14 as well as the 11th FYP’s target of 85 percent of total expenditure coverage by domestic revenues as the overriding parameters for assessing the fiscal space and recommending any revision of pay and allowances.

6.1 11th FYP Projection

As per the 11th FYP Document, the total resources (revenue & grants) outlay was projected at Nu. 209.328 billion against the total expenditure outlay of Nu. 224.165 billion. The resources included domestic revenue of Nu. 150.689 billion and grants of Nu. 58.639 billion. On the expenditure front, Nu. 132.165 billion was projected for recurrent expenditure and Nu. 92.000 billion for capital expenditure. The projected fiscal deficit was Nu. 112.150 million (0.2 percent of GDP) after adjusting for net lending.

The 11th FYP outlay included provisions for revision in pay and allowances. The provision for salary revision in the 11th FYP has been adjusted within the plan outlay. The provision for salary consolidation amounting to Nu. 5.119 billion has been considered as available fiscal space for revision in pay and allowances.

6.2 Medium Term Fiscal Framework (MTFF) as of December 2013

Since the MTFF is a public finance projection updated quarterly by the Macroeconomic Framework Coordination Committee (MFCC), the Commission used the December 2013 MTFF as the basis for assessing the fiscal space.

6 FISCAL SPACE


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Table 6.1: Baseline Fiscal projection: MTFF, December 2013 (Nu. in millions)

2013/14 2014/15 2015/16 2016/17 2017/1811th FYP

Budget Proj. Proj. Proj. Proj.

Revenue & Grants 30,238 38,235 40,544 42,690 55,719 207,426Domestic Revenue 22,391 24,599 26,185 28,828 41,093 143,096

Tax 15,866 18,151 19,758 22,144 26,771 102,690

Non-tax 6,525 6,448 6,427 6,684 14,322 40,406

Grants 7,835 13,636 14,359 13,862 14,625 64,317

Outlay 35,528 39,137 42,705 46,300 47,382 211,051Total Expenditure 37,426 41,077 44,786 48,314 49,475 221,078

Current 19,211 23,311 24,658 29,708 32,190 129,078

Capital 18,215 17,766 20,128 18,606 17,285 92,000

Net lending (NL) -1,898 -1,939 -2,081 -2,015 -2,093 -10,026

Fiscal Balance -5,290 -902 -2,161 -3,609 8,337 -3,626

Net Borrowings -92 3,459 -331 39 2 3,078Borrowings 2,667 6,364 2,916 3,027 3,167 18,141

Repayments 2,758 2,905 3,247 2,988 3,165 15,063

Resource Gap -5,381 2,557 -2,492 -3,570 8,339 -548

In percent of GDP

Revenue & Grants 25.5 28.9 27.7 26.3 26.2 26.9Domestic Revenue (DR) 18.9 18.6 17.9 17.7 19.3 18.5

Grants 6.6 10.3 9.8 8.5 6.9 8.4

Outlay 30.0 29.6 29.2 28.5 22.3 27.9 Total Expenditure 31.6 31.1 30.6 29.7 23.3 29.3

Current 16.2 17.6 16.9 18.3 15.1 16.8

Capital 15.4 13.4 13.8 11.5 8.1 12.4

Fiscal Balance -4.5 -0.7 -1.5 -2.2 3.9 -1.0

Resource Gap -4.5 1.9 -1.7 -2.2 3.9 -0.5

Coverage by DR Current Expenditure by DR 117% 106% 106% 97% 128% 111%

Capital Expenditure by DR 17% 7% 8% -5% 52% 16%

Total Expenditure by DR 60% 60% 58% 60% 83% 64%

Source: MFCC


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6.3 Expenditure Rationalization

As part of expenditure rationalization, the Commission capped the provision for the civil service growth at 2 percent and the provision for in-country travel budget at 15 percent of wage bill. By capping the growth in the civil service to 2 percent, there was an annual savings of Nu. 189 million, while a capping on the in-country travel budget provided for a further annual savings of Nu. 108 million.

With the recommendation to withdraw pool vehicles, the annual recurrent cost of pool vehicles amounting to Nu. 409 million could be saved. There might be some increase in expenditures as a consequence of the need to hire vehicles for conveyance for which rationalization of travel requirements and a capping of the travel budget is recommended.

In view of the increasing cost of salary based allowances like the professional allowances, the Commission converted these allowances that were on percentage basis to lumpsum basis, which would result in a saving of Nu. 151 million over the four years period under consideration.

Overall, the Commission projected expenditures savings of Nu. 2.973 billion during the 11th FYP.

Table 6.2: Expenditure Rationalization

Sl. No Descriptions2014/15 2015/16 2016/17 2017/18

11th FYPProj. Proj. Proj. Proj.

Expenditure Savings 700 728 757 787 2,973

1Containing Civil Servant Growth at 2% p.a.

184 187 191 195 757

2Capping in-country travel at 15% of the Wage Bill

107 107 107 107 428

3Savings from Pool Ve-hicle Recurrent Cost

409 409 409 409 1,638

4Converting Salary based allowance to lumpsum allowance

0 25 50 76 151

6.4 Revenue Enhancement

While assessing the fiscal projections, the Commission noted that the commissioning of the Punatsangchhu-I project will be deferred from FY 2016-17 to FY 2018-19. As a result, the domestic revenue projections were revised downwards. The revision in the Chhukha hydropower that was agreed to in February 2014, with an estimated additional revenue of Nu. 1.970 billion, helped in enhancing the fiscal space.

The Commission also explored other possibilities to enhance the domestic revenue. With the


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recommendation to monetize the duty free vehicle quota, an additional revenue of Nu. 665 million is estimated to be realized during the 11th FYP period. The proposed upward revision in salary and allowances of the public servants will also translate into increase in PIT revenues of about Nu. 313 million.

Overall, the Commission projected additional revenues of Nu. 2.948 bill in the 11th FYP period.

Table 6.3: Revenue enhancement

Sl. No

Sources2014/15 2015/16 2016/17 2017/18 11th

FYPProj. Proj. Proj. Proj.

Additional Revenue 1,282 554 555 557 2,948

1Chhukha Power Tariff Revi-sion

830 380 380 380 1,970

2Additional PIT revenue from salary revision

76 78 79 81 313

3Tax Revenue from Vehicle Quota

376 96 96 96 665

With the expenditure rationalization of Nu. 2.973 billion, the revenue enhancement measures of Nu. 2.948 billion, and provisioning for salary consolidation of Nu. 5.119 billion, a fiscal space of Nu. 11.040 billion was created in the 11th FYP outlay.

Table 6.4: Fiscal Space

Fiscal Space

2014/15 2015/16 2016/17 2017/1811th FYP

Proj. Proj. Proj. Proj.

3,261 2,561 2,591 2,623 11,040


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7 GROwTH TRENDS: CIVIL AND PUBLIC SERVICE

7.1 Civil Service

Ever since Bhutan embarked on its development plans in the early 1960s and with rapid socio-economic growth, the need for competent manpower in the government increased rapidly. To administer the civil servants, the Royal Civil Service Commission was established in 1982 with accountability, honesty, impartiality, integrity, loyalty, professionalism, and leadership as the core values of the civil service in its commitment to the “Tsa Wa Sum”. Overtime, the increases in the number of the employees in the civil service and other public services has outpaced the growth rate in population; as a result of which the ratio of public servants to population has kept on increasing. Bhutan today has one of the highest civil servants to population ratios in the region.

A direct consequence of such a fast burgeoning public service is the heavy burden on the exchequer in terms of pay, allowances and benefits, both while in service and also post retirement. Any small consideration of increases in pay and allowances has huge financial implications due to the sheer numbers of the civil and public services.

It will be most important for Bhutan’s future fiscal sustainability and in the efficient delivery of services that the Government ensures that the widely touted policy of a “small, compact, efficient and effective” civil service is implemented rigorously. This will be the single most daunting challenge not only in rationalizing the growth in the civil service, but also to link pay and allowances to performance and to affordability. A key assumption underpinning the recommendations of the Commission is that the annual growth in the civil service going forward must be contained to within 2 percent; diverging from the experience of 5 percent growth over the last so many years and the provision of 4 percent growth in the civil service that has been provided for in the 11th FYP projections.

In the long term, the civil service would need to consider implementing the policy of “zero growth” and downsizing with the corporate and private sectors filling in the gaps.

Figure 7.1: Civil Service growth

Source: RCSC

7 GROwTH TRENDS: CIVIL AND PUBLIC SERVICE


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During the 10th FYP, the civil service grew at an annual average of 5 percent. The total number of civil servants (EX/ES1-O4) as on June 2013 is 24,856. About 33 percent of civil servants are based in Thimphu, 65.5 percent are outside Thimphu in the Dzongkhags, and 0.5 percent are abroad mostly in the Missions and Embassies. In terms of positions, more than half of the civil servants are in the professional and management (P1-P5) followed by 39.5 percent in the supervisory and support position (S1-S5), 9 percent in the operational (O1-O4), and about 1 percent in Executive and Specialist position.

Figure 7.2: Civil Servants by Position Category (as on June 2013)

By age group, 50 percent of the civil servants are in the age group between 25-34 years, 21 percent between 35-44 years, 11 percent between 45-54 years, about 9 percent between 18-24 years and the remaining 2 percent are aged above 55 years. The majority of the civil servants in professional and management group are in between the ages of 25 and 44 years.

From 2008 to June 2013, some 8,889 civil servants were recruited at an annual average of 1,617. The maximum recruitments were into the professional and management positions (3,759) followed by supervisory and support (3,516) and operational (772). Of these recruitments, a maximum number of 3,359 were inducted into the Ministry of Education and 1,175 into the Ministry of Health.

The number of employees separated from the civil service during the period was about 2,797 with highest attrition of 1,219 in 2011 mainly due to the de-linking of the Royal University of Bhutan from the civil service. The average annual separation during the period was about 560 civil servants. Of the 265 civil servants that separated in the first half of 2013, the professional and management group accounted for 54 percent.

While many separated on retirement, some left the civil service taking advantage of employment opportunities in other sectors like corporate, private and international organizations, and still others left to join politics.


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7.2 Other Public Service

As of June 2013, there were 7,873 personnel under this category of “other public service”, which constitutes 24 percent of total public servants. They include Members of Parliament (72), Local Government representatives (1,704), Holders and Members or Commissioners of Constitutional Offices (24), General Service Personnel (1,239), Elementary Service Personnel (3,155), NFE Instructors (949), consolidated contract personnel (448), para-regular personnel (186), RAPA (91) and others (5).

The Local Government representatives at Gewog level such as the Gups, Mangmis, Geydrungs and Tshogpas constitutes 22 percent of “other public service”. The annual salary expenditures on account of Gewog level local government totals Nu. 147.977 million, which constitutes 23 percent of total salary expenditure under “other public service”.

The local government machineries have proliferated with democracy and decentralized governance. The local governance structures were largely unfunded prior to the introduction of the democratic system. Today, the local government structures have evolved into salaried “public service” emulating the civil service. Similar to the civil service, re-structuring of the gewogs with delegation of powers, responsibilities and accountabilities appears to be possible and could bring in efficiencies that could reduce the financial implications to the government.

The proliferation of thromdes and yoenla thromdes, if allowed without any rationalization would also add to inefficiencies in the systems. While the agencies might be required, the Commission recommends that the government consider multi-tasking of many of these agencies after rationalizing the roles and responsibilities of each of the agencies. The public might be better served through a smaller compact administrative system.


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8 RECOMMENDATION FOR REVISION OF PAY AND ALLOwANCES

Bhutan is largely dependent on its civil and public services to deliver the policies and planned activities on the ground. Since the corporate and private sectors are yet to truly become the “engines of growth”, the civil and public services have had to bear the brunt of nation building.

For the effective and efficient delivery of services, the civil service has to continue to attract the best human resources from the market, and for this the pay and allowances of the civil and other public services have to remain competitive. The government also has to ensure that the services provide good working environment to motivate the employees to stay on and serve the nation.

While the ethos of public service entails making sacrifices, it is when the pay and allowances are not sufficient to meet the basic requirements for themselves and their families that morale of the civil servants get affected, and then the elements of misuse and corruption are likely to creep in. The country has been going through unprecedented inflation levels over the last couple of years because of the economic situation that is also affected by the economic downturn in India and elsewhere. The real income of the civil service has been eroded by 20.1 percent since the government last approved the lumpsum salary allowances in 2011.

The Commission was primarily to consider that the civil and public services get compensated equitably for the services rendered in keeping with the constitutional provisions for “fair and reasonable remuneration for one’s work” and in keeping with the concept of “equal pay for equal value of work”. However, the present economic situation restricts the fiscal space for the Commission to consider a revision beyond attempting to take care of the erosion in real income that has already taken place.

8.1 Salary Revision: Reference Period

The proposed salary revision of 2014 is based on the 2010 pay scale and 2011 lumpsum salary allowance. On the 2011 gross salary2, the revision proposed is 20 percent.

The 20 percent revision is proposed to cover the 20.1 percent income erosion since the last salary revision in 2011. The revision is recommended to become effective from 1st July 2014. The overall pay structure for all civil and public servants is placed at Annexure 3.

8.2 Prime Minister, Cabinet Ministers and Equivalent Post Holders

Salary

The Commission reviewed the recommendations of the First Pay Commission, and the decisions of the First Parliament and the government then, with regard to the pay scales of the Prime Minister (PM), Cabinet Ministers and other equivalent Post Holders.

2.2011 lumpsum salary allowance merged with the 2010 pay scale.

8 RECOMMENDATION FOR REVISION OF PAY AND ALLOwANCES


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The First Pay Commission had proposed salary revisions for civil servants ranging from 40-77 percent progressively starting from O4 to EX/ES-1 level on the 2006 pay scales. Similar revisions had been proposed for the PM, Cabinet Ministers and other equivalent Post Holders. In view of the prevailing economic situation then, the Government had not considered the salary revision as proposed by the First Pay Commission in its entirety. The Government had instead granted a 35 percent revision for civil servants with effect from 1st January 2009, whilst the salary of the PM, Cabinet Ministers and others were maintained at same level as the 2006 pay scale. However, the annual discretionary grants, which are not taxable, were revised from Nu. 200,000 to Nu. 300,000 for the PM, and from Nu. 100,000 to Nu. 200,000 for the Cabinet Ministers, Speaker of the National Assembly (NA), Chief Justice of Bhutan, Opposition Leader (OL) and Chairperson of the National Council (NC).

Recommendation of the First Parliament

During the 6th Session of the First Parliament (November 2010), a lumpsum salary allowance (approximately equivalent to 15 percent of the 2010 pay scales) was endorsed for the civil servants. Although the First Parliament at its 6th Session also endorsed the pay structure as proposed by First Pay Commission for the PM, Cabinet Ministers, Speaker of NA, Chief Justice of Bhutan, OL, and Chairperson of NC, the implementation of the pay structure was left to the Second Parliament to consider.

The basic pay recommended by the First Pay Commission was 131 percent higher than the current basic pay for the PM and 67 percent higher than the present pay scales for the Cabinet Ministers, Speaker of the NA, Chairperson of NC, OL and the Chief Justice of Bhutan.

Table 8.1: Pay Scale of PM and Cabinet Ministers recommended by the First Parliament

Position LevelExisting (2006 pay scale) Recommendation by 1PC

% Change

Min. Incr. Max. Min. Incr. Max.

Prime Minister 78,000 1,560 85,800 180,000 3,600 198,000 131%

Cabinet Ministers 78,000 1,560 85,800 130,000 2,600 143,000 67%

Speaker of NA 78,000 1,560 85,800 130,000 2,600 143,000 67%

Chairperson of NC 78,000 1,560 85,800 130,000 2,600 143,000 67%

Opposition Leader 78,000 1,560 85,800 130,000 2,600 143,000 67%

Chief Justice of the SC 78,000 1,560 85,800 130,000 2,600 143,000 67%

Recommendations of the Second Pay Commission

The world over, the salary of the PM as the Chief Executive is always higher than the Cabinet Ministers and other public servants. In the case of Bhutan, the salary of PM is presently at par


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with the Cabinet Ministers. The salary of the PM, the Cabinet Ministers and others equivalent post holders were not revised since 2006 with the exception of the increase in the annual discretionary grants in 2010. For all practical purposes, the discretionary grants are to be construed as part of “pay” or “salary”.

The National Committee on Parliamentarian Entitlements proposed restructuring of basic pay for all MPs including the PM, Cabinet Ministers, Speaker, Chairperson of NC, OL, Deputy Speaker and Deputy Chairperson of NC and make them all equal, with additional allowances or remunerations for positions and responsibilities considered separately.

The pay structure of MPs including Deputy Speaker and Deputy Chairperson of NC were revised only in 2011, and therefore the Commission recommends that the present segregation and differentiation in pay scales be maintained for the MPs and the Deputy Speaker and the Deputy Chairperson of NC. The Commission, however, recommends that the current pay scales do need to differentiate the roles, responsibilities and accountabilities of the PM, the Cabinet Ministers and other equivalent post holders commensurate with the terms and conditions of their posts while ensuring that the gaps are maintained within reasonable parameters.

The Commission therefore recommends an upward revision of 92 percent in the pay scale for the Prime Minister and 69 percent for the Chief Justice of Bhutan and Speaker of the National Assembly, reflecting their roles and responsibilities as the Heads of the three branches of the Government. An increase of 54 percent is recommended for the Cabinet Ministers, the Ol and the Chairperson of the nC.

The salary of the PM is maintained at 25 percent higher than the Cabinet Ministers, and that of the Speaker of the NA and the Chief Justice of Bhutan is recommended at 10 percent higher than the Cabinet Ministers.

Table 8.2: Recommendations by the Second Pay Commission

Position LevelExisting 2nd PC Recommendation

% Change


Prime Minister 78,000 1,560 85,800 150,000 3,000 165,000 92%

Speaker of NA 78,000 1,560 85,800 132,000 2,640 145,200 69%

Chief Justice of the SC 78,000 1,560 85,800 132,000 2,640 145,200 69%

Cabinet Ministers 78,000 1,560 85,800 120,000 2,400 132,000 54%

Chairperson of NC 78,000 1,560 85,800 120,000 2,400 132,000 54%

Opposition Leader 78,000 1,560 85,800 120,000 2,400 132,000 54%

Allowances and Grants

The other entitlements and allowances of the Prime Minister, Cabinet Ministers and other position holders will remain the same as per the Compendium of the Entitlements of Cabinet


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Ministers and of Equivalent Post, 2009 except for those allowances which are specifically addressed in the relevant Chapters below.

8.3 Members of Parliament

Salary

The salary of Members of Parliament (MPs) was fixed at Nu. 30,000 per month till December 2008. This was increased by 20 percent in January 2009. The pay scales for MPs were further revised to Nu. 50,445-1,010-55,495 in January 2011 and made at par with the pay scales of Government Secretaries together with lumpsum salary allowances of Nu. 5,045.

The Commission recommends a 20 percent salary revision for MPs after merging the lumpsum salary allowance to their existing pay scales.

As per the Parliamentary Entitlement Rules, 2009, the salary of the Deputy Speaker of National Assembly and Deputy Chairperson of National Council should be maintained at 10 percent higher than the salary of the MPs. The present pay scale of Deputy Speaker and Deputy Chairperson is (Nu. 63,000-1,260-69,300), which is 25 percent higher than the MPs. With the present recommendations, the pay scale of the Deputy Speaker/Deputy Chairman becomes 14 percent higher than the MPs against the provision of 10 percent in the rules.

Table 8.3: Pay Scale of Member of Parliament

Position LevelExisting Pay Scale

Recommendation (Pay Scale 2014) Percent


Dy. Speaker of NA 63,000 1,260 69,300 75,600 1,510 83,150 20%

Dy. Chairperson of NC 63,000 1,260 69,300 75,600 1,510 83,150 20%

Members* 50,445 1,010 55,495 66,600 1,330 73,250 20%** 20 percent on 2011 gross salary (basic plus lumpsum salary allowance)

Allowances and Grants

The allowances and other emoluments as entitled in the Parliamentary Entitlement Act, 2008 will be maintained the same except for the salary based allowances, which will be provided as a lumpsum. The recommendation for revision of housing allowance is provided separately under the allowances chapter.

8.4 Holders, Members and Commissioners of Constitutional Bodies

Salary

The salary and other entitlements of the Chief Justice of Bhutan is now recommended to be at


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par with that of the Speaker of the National Assembly and is set 10 percent above that of the Cabinet Ministers.

The salary of the other position holders, members and commissioners of constitutional bodies were reviewed to ensure that pay and other entitlements commensurate their roles and responsibilities as well as the terms and conditions of their appointments; especially considering the tenures of the positions. The Commission recognized that beyond the three branches of the government, the constitutional bodies have an important role to play in ensuring good governance, and thus there was a need to ensure that people appointed to these positions are remunerated fairly.

In doing so, the Commission noted that some of the recommendations would be in conflict with existing Acts that inadvertently included references to specific pay and allowances. However, in line with the Constitution, the Commission felt that the recommendations of the Pay Commissions, established from time to time, should and must have precedence over any other existing Acts in respect of pay and allowances.

The Commission therefore recommends a 30 percent revision in the pay scales for the Chairpersons of the RCSC and the aCC, the Chief Election Commissioner and the auditor General and a 25 percent revision for the Commissioners.

Table 8.4: Pay Scale of Post Holders of Constitutional Bodies

Position LevelExisting Pay Scale

Recommendation (Pay Scale 2014) Per-

cent Min. Incr. Max. Min. Incr. Max.

Chairperson, RCSC 63,000 1,260 69,300 81,900 1,640 90,100 30%

Chairperson, ACC

63,000 1,260 69,300 81,900 1,640 90,100 30%

Chief EC, ECB 63,000 1,260 69,300 81,900 1,640 90,100 30%

Auditor General 63,000 1,260 69,300 81,900 1,640 90,100 30%

Commissioners (RCSC, ACC, ECB)

50,445 1,010 55,495 63,200 1,265 69,525 25%

The National Judicial Commission (NJC) had recommended that the pay scale of the Chief Justice of the High Court not be at par with the Justices of the Supreme Court as it created certain constitutional issues (equal pay for work of equal value) and possible administrative inconsistencies in case the Chief Justice of the High Court is subsequently elevated to a Justice of the Supreme Court. The NJC had proposed the existing pay scale of Chief Justice of the High Court to be fixed at Nu. 52,465–1,050–62,965, which is lower than that of a Justice of Supreme Court by 20 percent.

The Commission recognized that the Drangpons of Supreme Court, Chief Justice of High


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Court and the Drangpons of the High Court are 10 years tenure-based constitutional positions where as other constitutional positions have a tenure of only 5 years. Furthermore, unlike other constitutional positions, these positions in the Judiciary have a career path, as indicated by the rationale for maintaining the difference between Chief Justice of the High Court and the Justices of the Supreme Court, as was recommended by the NJC.

The Commission recommends to restructure the pay scales of the Constitutional Post Holders of the Judiciary, whereas the salary structures for the other Judiciary posts are recommended to be at par with the civil service in keeping with their position levels.

Table 8.5: Pay Scale of Post Holders of Judiciary

Position LevelExisting pay scale Recommended pay scale Per-

centMin. Incre. Max. Min. Incre. Max.

Drangpons of SC 63,000 1,260 69,300 75,600 1,510 83,150 20%

Chief Justice of HC* 63,000 1,260 69,300 66,600 1,330 73,250 6%

Drangpons of HC** 50,445 1,010 55,495 63,200 1,265 69,525 14%*Structure change; **14 percent on 2011 gross salary (basic plus lumpsum salary allowance)

The recommendation of allowances and other emoluments are provided separately under the allowances chapter.

8.5 Privy Council

The Lhengye Zhungtshog approved the pay scales and entitlements of the Privy Council Members in 2011. The present Chairperson draws the same pay and allowances of the Cabinet Ministers. The pay scales of Members were fixed at Nu. 50,445-1,010-55,495.

The pay scales of the Members are recommended to be revised by 25 percent while the Chairperson is equated to that of the Cabinet Ministers.

Table 8.6: Salary Scale of Privy Council

Position Level

Pay Scale 2014Increase After

Merger

Min. Incr. Max. AmountPer-cent

Chairperson 120,000 2,400 132,000 42,000 54%

Council Members 63,200 1,265 69,525 12,755 25%

With regard to revision of the allowances and other entitlements, it is covered under the allowances chapter.


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8.6 Office of Attorney General

The Lhengye Zhungtshog approved the Attorney General’s pay scale and entitlements in 2010. The pay scale was fixed at Nu. 63,000-1,260-69,300.

The Commission recommends a 20 percent revision on the existing salary of the Attorney General.

Table 8.7: Recommended Pay Scale of Attorney General

Position LevelPay Scale 2014

Increase After Merger

Min. Incr. Max. Amount Percent

Attorney General 75,600 1,510 83,150 12,600 20%

With regard to revision of the allowances and other entitlements, it is covered under the allowances chapter.

8.7 Other Public Servants (GSP, ESP, NFE, RAPA, LG, Para, Consolidated Contract)

The pay scales for this section of the public servants were fixed in 2009. During the time when the lumpsum salary allowances were approved for regular civil service, only GSP and Para-regular were included as beneficiaries.

The Commission recommends that the lumpsum salary allowance (at rates consistent with the 2011 rates for civil service) be first merged to the existing pay scales for those who were not covered at the time when the 2011 lumpsum salary allowance were approved. On this, the Commission recommends the 20 percent salary revision.

8.7.1 General Service Personnel (GSP) and Elementary Service Personnel (ESP)

GSP and ESP are recruited to meet the requirement of skilled and semi-skilled services in the government. Currently, there are about 1,239 GSP and 3,155 ESP under public service that are hired normally on two-year contract terms. The numbers have been increasing over the years just like the civil service.

a 20 percent revision after merger of lumpsum salary allowance is recommended for the GSP employees. It is further recommended that the existing GSP-I and GSP II positions be merged into a single GSP position. A 40 percent revision is recommended for ESP employees, as they were not given the lumpsum salary allowance in 2011.

Table 8.8: Recommended pay for GSP and ESP

Position Level Pay Scale 2014Increase After Merger

Amount Percent

GSP 9,000 1,477 20%

ESP 7,000 2,000 40%


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The GSP and ESP employees should continue to draw salaries at the existing scales till their current contracts expire. On re-appointment and for new recruits, the recommended pays should apply.

With the recommended revisions, the annual salary costs to the government on account of GSP employees would increase from Nu. 95.144 million Nu. 130.560 million, and on account of the ESP employees, from the existing Nu. 189.3 million to Nu. 265.020 million. In view of the government’s strategy to promote private sector development, it is recommended that, in due course of time, the GSP and ESP services be outsourced to the private sector and even to the corporate sector. The private and the corporate sectors might be able to provide better and effective services to the government. Meanwhile, the government might also like to consider curtailing the hiring of more employees in the GSP and ESP categories.

Although GSP and ESP categories of public service are entitled for some benefits like civil servants, they are not covered under PF and pension schemes. In keeping with the provisions of the Labour and Employment Act, 2007, it has been proposed that for those under Consolidated Contract, GSP and ESP, coverage under the pension or provident fund schemes be provided. If implemented, the financial implications to the Government would be high.

The Commission recommends that the Government implement terms and conditions of their contract services so that the provisions of the labour & Employment act, 2007 are not breached. In order to institute a comprehensive social protection scheme, it is also recommended that the government may like to explore a Retirement Policy Scheme to cover the ESP/GSP, and other formal sector workforces including the private and the self-employed.

8.7.2 non-Formal Education (nFE) Instructors

The salaries for the NFE instructors were revised to Nu. 6,000 per month in 2009 from Nu. 4,500 per month that had been set in 2007. The allowance for regular teachers who shoulder additional responsibility of teaching NFE was also revised from Nu. 1,500 in 2007 to Nu. 2,000 per month in 2009.

The Commission recommends a monthly pay of nu. 8,400 for nFE instructors, a 40 percent revision as they were not provided lumpsum salary allowance in 2011. However, a revision of the allowance of nu. 2,000 per month for regular teachers teaching nFE is not recommended.

8.7.3 Consolidated Contract (mainly Teachers)

The civil service recruits employees for specific purposes and for time bound periods, and such recruits are placed under Consolidated Contract. Such employees are generally recruited in the teaching profession and their remuneration was fixed at Nu. 10,000 per month.

The Commission recommends a monthly pay of nu. 14,000 for those under Contract Consolidated category, a 40 percent revision as they were not provided with the lumpsum salary allowance in 2011. The Commission also recommends that such Consolidated Contract employees be phased out.


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8.7.4 Royal academy of Performing arts (RaPa)

The pay for the RAPA staff (S4-O3) was revised by 45 percent in 2005 and by another 45 percent in 2009. These revisions were merged in July 2006 and July 2010 as part of the pay scales. The RAPA staffs are also not covered under Pension and Provident Fund scheme. Currently, the RAPA staff are paid maximum gratuity of Nu. 30,000 on retirement. The lumpsum salary allowance of 2011 was not approved for those employees with RAPA.

The Commission recommends a 37 percent revision in the salary for RaPa as they were not provided the lumpsum salary allowance in 2011, and that their salaries be mapped to equivalent positions in the civil service. while the gratuity ceiling of the civil service is recommended to be applied to employees of RaPa, the retirement age should be determined as per the nature of their jobs.

8.7.5 The Local Government

The role of the Local Government is an extremely important one under the Democratic Constitutional Monarchy. Attracting and motivating competent people as functionaries in the Local Government is a major challenge as the existing pay and allowances are not commensurate with their roles and responsibilities. While noting the challenges, the Commission also recognized that for a small country that is increasingly getting well connected by motorable road and modern communication facilities, the size of the local governments, particularly at the Gewog levels, were expanding and had grown very fast during the 10th FYP.

The Commission also noted that while the local functionaries and their administrative machineries were critical to the democratic process, devolution of power and decentralization, there were areas that could be considered to be overlapping with the Dzongkhag administration and the sectors that were present at the Gewog levels. The roles and responsibilities of the functionaries at the Gewog and Dungkhag levels need rationalization and these functionaries could shoulder additional responsibilities without compromising the quality of services to the people.

The Commission strongly recommends the rationalization and consolidation of the number of Gewogs and Dungkhags with a view to reduce the administrative machinery at the Local Government level. This could create fiscal space that could be used towards enhancing pay and allowances of the very Local Governments.

When the pay and allowances of the civil service was revised in 2009 and 2011, the salaries of the representatives of the Local Governments were also revised. Gups, Mangmis and Gedrungs received a 65 percent increment on their 2005 pay scales in 2011. The pay of the Tshogpas was revised to Nu. 5,000 in 2012 from Nu. 1,000 in 2005. Although the salaries for the functionaries at the Gewog levels were revised as recently as in FY 2011-12, the starting pay scales of these local functionaries were also quite low.

The first elections of Thrompons and Thromde Thuemi/Tshogpa were held during the 10th FYP. The pay scale of the Thrompon of a Thromde ‘A’ was fixed at par with the pay scale of civil


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servants at EX/ES-2 level with lumpsum monthly salary allowance of Nu. 5,700. Thrompons are also entitled to rent-free accommodation or in lieu thereof housing allowance of 20 percent of the basic pay. The pay and allowances of Thromde Thuemi/Tshogpa are at par with Dzongkhag Throm and Gewog Tshogpa.

Table 8.9: The existing salary and allowances for local government

Salary & AllowancesPosition Level

Thrompon Gup Mangmi Geydrung Tshogpa

Strength 4 205 205 205 1,085

Pay scale38,475-770-

42,32414,355 10,765 9,570 5,000

Monthly Salary Allowance 5,700

Annual TA/DA within Gewog 6,000 4,500 - -

Monthly Voucher Allowance 1,000 500 - - -

Monthly House Rent Allowance

7,695

The local government institutions are gaining importance with gradual expansion and decentralization. The roles and responsibilities along with the accountability of the local government have also increased over the years. The local governments are required not only to plan and execute those plans, but also take up the activities of the central government within their administrative boundaries. The need for qualified and competent officials is critical to ensure success in the execution of the plans at the local government level. In order to attract qualified and competent local government representatives, it is essential to ensure that the salaries and entitlements for the local governments are made more attractive. Extensive consultations were held with the Ministry of Home & Cultural Affairs in respect of the Local Governments.

The Commission recommends the revision of the Thrompons’ salary at the same level as for EX/ES-2 in the civil service and 40 percent revision for Thromde Thuemis/Tshogpas.

The Commission recommends a 36-40 percent revision in the salaries of the Gups, Mangmis, Gedrungs, and Tshogpas at the Gewog level. The Commission also recommends to enhance the annual travel grant for travel within the Gewog to Nu. 18,000 for Gups from the existing nu. 6,000, and to nu. 13,500 for Mangmis from the existing nu. 4,500.


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Table 8.10: The Financial implications from Salary Revision of LG

Position Level Strength Recommended (Nu.)Annual Implica-

tion (Nu.)

Min Incre. Max.

Thrompon 4 53,000 1,060 58,300 2,544,000

Gup 205 20,000 49,200,000

Mangmi 205 15,000 36,900,000

Geydrung 205 13,000 31,980,000

Tshogpa 1,085 7,000 91,140,000

Annual Implication 211,764,000

Net Increase from Existing (%) 39%

The revision of the allowances and other entitlements are covered under the Allowances’ chapter.

8.8 Civil Servants

The remuneration of civil servants, from Cabinet Secretary to the lowest O4 level, has been revised from time to time to meet the increasing cost of living, and to retain and build professionalism in civil service system, and to motivate the civil servants to serve the Tsa Wa Sum.

Table 8.11: Salary Revision

A number of allowances that were in place prior to being consolidated and merged with the salary in 1988; with increases ranging from 122 percent to 341 percent (EX – GSP level) from the then 1985 pay scales. Since then, salaries of the civil servants have been revised more than seven times and the last revision was in 2011 in the form of lumpsum salary allowances.

The Commission recommends a 20 percent revision of the pay scales of all civil servants after consolidation of the lumpsum salary allowances on the 2010 pay scales. Further, the Commission recommends that the pay scale for the Cabinet Secretary be fixed at 14 percent higher than that of the Government Secretaries considering the higher responsibilities and accountability of the Cabinet Secretary.


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Table 8.12: Recommended Pay Scales of Civil Service

Position Level Pay Scale 2014 Increase After Merger

Min. Incr. Max. Amount Percent

Cabinet Secretary 75,600 1,510 90,700 12,600 20%

Government Secretaries 66,600 1,330 79,900 11,110 20%

EX/ES-1 63,200 1,265 69,525 10,546 20%

EX/ES-2 53,000 1,060 68,900 8,825 20%

EX/ES-3 44,800 895 58,225 7,460 20%

P1 35,300 705 45,875 5,896 20%

P2 31,200 625 40,575 5,229 20%

P3 27,300 545 35,475 4,532 20%

P4 24,300 485 31,575 4,024 20%

P5 19,900 400 25,900 3,298 20%

S1 18,300 365 23,775 3,024 20%

S2 16,600 330 21,550 2,759 20%

S3 15,200 305 19,775 2,553 20%

S4 13,500 270 17,550 2,277 20%

S5 12,500 250 16,250 2,115 20%

O1 11,800 235 15,325 1,949 20%

O2 11,100 220 14,400 1,846 20%

O3 10,100 200 13,100 1,690 20%

O4 9,400 190 12,250 1,587 20%

8.8.1 Compression Ratio

The Compression Ratio, the ratio of the salary of the highest civil service level (EX/ES1) to the lowest level (O4), gives an idea of the overall salary differential in the civil service. The compression ratio for the basic pay in the civil service has remained the same at 6.7 since 2006 since the same percentage increases were considered each time there was a salary revision. However, after accounting for PIT, the compression ratio has reduced over the years.


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Table 8.13: Compression Ratio

Position LevelBasic Pay

2006 2010 2014

Highest Level (EX/ES1) 33,970 45,860 63,200

Lowest Level (O4) 5,040 6,805 9,400

Compression Ratio 6.7 6.7 6.7

The compression ratios in the private sector are higher as employees at the lower levels are paid much less than those at similar positions in the civil service. However, the pay scales of those at the top levels in private and corporate sectors tend to be significantly higher than their counterparts in the civil service. Since the civil service pay at the lower levels are more generous than those in private sector, the civil service continues to be the preferred option for job seekers at these levels.

The pay structures for the corporate sector are generally the same as the civil service pay structure with a differential of about 15 percent. When the first corporations were curved out of the civil service, the pay scales were at least 45 percent higher for the corporate sector when compared to the civil service. In recent years, the differential reduced to 30 percent and then to the present 15 percent, which have been reached through certain understanding between the public sector corporate bodies and the Ministry of Finance. Considering the other allowances of the corporate sector, the current differential between the corporate sector and civil service is about 1.3.

Going forward, it is important that pay differentials between and within the civil and the corporate services reflects demand and supply for skills in the market and also reflect the tenures and the terms and conditions of the posts. More and more professionals may leave the civil service for private and corporate sectors unless the differentials can be maintained within some acceptable limits.

Literatures suggest that compression ratio alone is not the best method to measure pay dispersion as it could be manipulated. Therefore, to obtain a more rounded perspective on pay dispersion, it is also useful to look at the multiple of the top pay to the median pay, as this would be a better indicator of pay dispersion and also more difficult to manipulate.

Using this measure, the multiple of top pay to the median pay for Bhutan is about 7.5 times considering the P5 pay as the median pay while the top pay considered is that of the Prime Minister. This is well within what is observed in other countries. However, future Pay Commissions may like to consider this ‘multiple’ while trying to arrive at an acceptable level of pay dispersion while at the same time ensuring that the principle of “equal pay for equal value of work” is upheld.


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8.9 Personal Income Tax (PIT)

Currently, there are 25,643 public servants who are in the tax brackets of Nu. 100,000. With the recommended revision in pay and allowances, the additional number of public servants who will enter into the current tax bracket is 573.

While “equal pay for equal value of work” will always be a very important consideration in fixing pay structures and allowances, given the present economic condition and low salary structures, it is those at the lower levels of the civil and public service who face the brunt of the high inflation due to the spiraling prices of food and non-food items. For the civil servants at the lower levels, more than 50 percent of their salaries are spent on rent, especially in the urban centres of Thimphu and Phuentsholing and places like Wangdue Phodrang where there is a huge shortage of housing stock due to the mega hydropower projects.

The Commission, in an attempt to alleviate those at the lower levels, generally recommended for the incorporation of a lumpsum salary allowance (that had not been incorporated in their pay structures in 2011) before the recommended revision of 20 percent is affected on fixing of new pay scales.

The Commission strongly recommends for increasing the taxable income bracket to nu. 200,000 from the existing Nu. 100,000, which would benefit the lower income level public servants with higher take home salaries.

There would still be a net increase of Nu. 9 million in PIT from the present PIT collections.

Table 8.14: Personal Income Tax Slab

Position Level

Exemption Threshold

Minimum Monthly Tax-able Income

Number of Public Ser-

vants within Tax Bracket

Percent Change

TDS Collec-tion

(Nu. in Mill.)

Percent Change

Existing Salary with Existing PIT Slab

100,000 8,333 25,643 217.62

Revised Salary with Existing PIT Slab

100,000 8,333 26,070 2% 293.15 35%

Revised Salary with Proposed PIT Slab

200,000 16,667 13,121 -49% 226.67 4%

Total Pub-lic Servants

32,725


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9 ALLOwANCES AND BENEFITS

The Commission made an earnest effort to work towards a “clean” wage bill (one where all allowances and benefits are monetized into one pay) and thus reviewed the existing allowances closely. In reviewing the experiences of other countries, the Commission noted that a “clean” wage bill has its own challenges; one major drawback being the additional burden on pension. While the need for continuation of the existing allowances was recognized, the Commission recommends some modifications to allow greater transparency and flexibility in its treatment going forward.

Currently, there are two different types of allowances in the Government. They are Lumpsum Allowances and Salary Based Allowances. Lumpsum allowances are those that are not linked to basic pay and provided as a fixed amount, whereas, the salary based allowances are those that are linked to the basic pay and are provided as varying percentages of the basic pay.

The main recommendation is to convert all allowances into lumpsum allowances as opposed to providing them based on the basic pay scale. Further, the Commission recommends that these allowances be reviewed periodically so that they are removed when no longer necessary. The Commission also recommends that allowances need to be sharpened to ensure that they have the desired impact such as the allowances that are being recommended to incentivise people to upgrade their qualifications with the hope that it will lead to better learning outcomes for the students.

9.1 Lumpsum Allowances

This section describes the various allowances under the category of the lumpsum allowances. The recommendations are also included under the respective headings.

9.1.1 Red Scarf allowance

The civil servants who are awarded red kabney are currently entitled to a monthly Red Scarf Allowance of Nu. 100 and this has been in place for over two decades.

Since this is a Royal Prerogative, the Commission did not review the Red Scarf Allowance.

9.1.2 Patang allowance

The practice of wearing a Patang is a custom and tradition signifying the importance of the respected positions in the public service. Thus far, a male public servant, who is required to wear a Patang but is not provided one by the Government, is given an allowance for buying the Patang. Before 2009, the allowance was Nu. 25,000 and was later revised to Nu. 50,000 as one time grant if the Patang is not provided by the Government. The Patang Allowance was

9 ALLOwANCES AND BENEFITS


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last revised in 2009, and since then the Government is also providing the Patangs to most of the recipients.

It is recommended to maintain the Patang allowance at nu. 50,000 as one time grant if the Patang is not provided by the Government.

9.1.3 High altitude allowance

Civil servants posted at high altitudes have to work under very severe climatic conditions and majority of these places do not even have basic amenities. Apart from the difficulties faced by the civil service at the place of posting, these civil servants have to maintain two establishments with one at his/her work place and another for his/her separated families in another place leading to additional expenses. Currently, High Altitude Allowance is provided at Nu. 1,000-2,000 per month for those working at places above 10,000 ft.

a revision in the monthly High altitude allowance is recommended at nu. 3,000 for the places above 12,000 ft (annexure 4) and nu. 2,000 for the places between 10,000 ft and 12,000 ft (annexure 5).

9.1.4 Difficulty Area Allowance

The rural areas in Bhutan have developed rapidly in recent years, in particular during the 10th FYP, with huge investments made in the development of infrastructure. Most of the places that were once considered remote now have access to basic facilities like telecommunication, electricity, roads, health and education. Nevertheless, there are still some remote places where development has not reached and civil servants are often not willing to take a posting in these places due to difficult conditions.

The objective of the Government to bring development to the remote areas may not be achieved unless civil servants are willing to get posted to such places for which adequate incentives need to be provided. Therefore, a monthly Difficulty Area Allowances using dholams as a measure are provided to civil servants posted to such places.

At present, officials receive Nu. 2,000 per month for the first dholam from the nearest motorable road and Nu. 500 for every additional dholam with a maximum ceiling of Nu. 5,000 per month, which is equivalent to 7 dholams. With the increase in transportation and other costs in recent years, the present Difficulty Area Allowances are not adequate to meet the increasing costs and to incentivize civil servants for the difficulties they have to live with. A problem with the earlier system was also that while transportation and other related costs increased with each dholam, the allowance was highest for the first dholam and much lower for the balance dholams.

To attract and motivate civil servants posted to remote areas, the Difficulty Area Allowance is recommended to be revised to nu. 2,000 for each dholam and the maximum ceiling raised by 100 percent to nu. 10,000 per month for a maximum of 5 dholams. The implementation of the revision in the Difficulty Area Allowance is however contingent on the Government


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reviewing and rationalizing the existing dholams nationwide.

Table 9.1: Difficulty Area Allowance

Description Existing RevisionPercent Change

First Dholam 2,000 2,000 0%

Allowance per additional Dholam 500 2,000 300%

Maximum Allowance 5,000 10,000 100%

Maximum Dholam 7 5 -29%

There are also some places of posting, such as the Manas National Park, where civil servants face great difficulty and thus need to be provided with Hardship Allowances even if they do not meet the dholam criteria.

In such specific situations, the Commission recommends that the Ministry of Finance be empowered to extend, on a case-by-case basis, Hardship allowances as it deems reasonable.

9.1.5 uniform allowance

The Government provides either uniform or uniform allowances to those civil servants who are required to wear uniform by their profession. In most cases the government provides uniforms and only medical nurses are provided uniform allowance of Nu. 3,000 per annum.

Table 9.2: Uniform Allowance

Position Level

Strength

Existing Proposal Recommended

Nu/An-num

Financial Implica-

tion

Nu/ Annum

Financial Implica-

tion

Nu/ Annum

Financial Implica-

tion

% change

Nursing staff

799 3,000 2,397,000 6,000 4,794,000 4,500 3,595,500 50%

Medical Doctors/BDS & Drungt-shos

156

Not

Appli-cable

- 900 140,400 Not recommended -

Techni-cians/Menpas/Clinical Officials/ HA/BHW

1797Not Ap-plicable

- 900 1,617,300 Not recommended -


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Ward boy/girl, cleaner, sweeper

489Not Ap-plicable

- 1,800 880,200 1,500 733,500 New

Total 2,397,000 7,431,900 4,329,000 81%

It has been proposed to revise the Uniform allowances for nurses by 100 percent and to introduce Uniform Allowances for doctors, health professionals, and supporting staff (ward boy, girl cleaner & sweeper).

The Commission recommends for a 50 percent increase in the annual uniform allowance for nurses from the present nu. 3,000 to nu. 4,500 and the introduction of an annual uniform allowance of nu. 1,500 for the supporting staff. no uniform allowance is recommended for doctors and other health professionals.

9.1.6 Radiation allowance

The medical professionals like radiologist and other relevant personnel involved in carrying out radiography and x-rays are provided Radiation Allowance of Nu. 300 per month as a compensation for possible radiation risk to their lives. This allowance has not been revised since 1999 and a proposal for increasing it to Nu. 1,500 per month was received.

Considering the associated risks, the Commission recommends a 100 percent revision of the Radiation allowance to nu. 600 per month.

9.1.7 Cash Handling allowance

The Cash Handling Allowance is provided to avoid problems like cash shortages and misuse of cash, which arises from handling cash especially by accounts and revenue personnel. With the expansion of information technology, most of the transactions today are online system based and this has reduced the cash transactions considerably.

The Commission does not recommend revision of the existing Cash Handling allowance.

9.1.8 Overtime allowance

Overtime allowance is provided to civil servants who are in position levels of S4 and below to compensate working during off-hours on weekdays, weekends and holidays. This is provided on pro rata basis, which is limited to three hours per day during weekdays and five hours per day during weekends and holidays.

The Commission doesn’t recommend any change to the existing rates for Overtime allowance.


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9.1.9 Communication allowance

Under communication allowance, the Government covers expenses for residence telephones and for purchase of mobile vouchers. The beneficiaries are Ministers, Holders, Members and Commissioners of Constitutional Offices, Government Secretaries, Joint Secretaries, Heads of Departments, Dzongdags, Drangpons, Drongrabs, Dungpas, Gups and other eligible public servants. More and more of the civil servants are switching to mobile phones rather than use the traditional handset phones. However, mobile charges have reduced drastically over the years with competitions among the service providers, the technological advances, and the increased volumes.

The Commission does not recommend any revision in the Communication allowance.

9.1.10 leave Encashment (lE)

Civil servants are currently entitled to earned leave of 2.5 days in a month or one month per annum which can be accumulated to a maximum of 90 days. The BCSR 2012 requires a minimum of 30 days leave balance for encashment and only one encashment is allowed in a financial year. As per BCSR 2012, employees have the option either to take earned leave or en-cash one month’s basic pay in lieu of earned leave. Although there is no change in the LE formula, due to the salary revision, civil servants’ LE would increase by at least 38-40 percent due to the merger of the existing lumpsum salary allowance and the revision of 20 percent in pay scales.

The Commission does not recommend any revision in leave Encashment.

9.1.11 leave Travel Concession (lTC)

Civil servants are granted an annual Leave Travel Concession equivalent to one month’s basic pay with a maximum ceiling of Nu. 15,000 to cover the travel expenses on taking leave. The last revision of LTC was in 2006 and it coincides with that of P5 basic salary. It is not the practice of the Bhutanese civil servants to take actual leave, and therefore civil servants normally not only avail LTC but also encash the accumulated earned leave.

The Commission does not recommend any revision of lTC ceiling of nu. 15,000.

9.2 Salary Based Allowances

The Commission, on review of the existing salary based allowances, has fixed these as lumpsum allowances after consolidation of the existing lumpsum salary allowances on the 2010 pay scales. To ensure greater transparency and equity to people in transition under the PCS, it was felt that there was a strong rationale to fix salary based allowance as a lumpsum amount. Such lumpsum allowances will not only be fairer for those receiving the allowances, it will be cheaper for the exchequer as it would not increase due to annual increments or whenever salary is revised.


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The Commission recommends that Salary Based allowances be provided as a lumpsum of the 2011 gross salary (2011 basic merged with the 2011 lumpsum salary allowance).

9.2.1 Professional allowance

BCSR 2012 provides that “The Government shall provide scarcity allowance to attract and retain professional civil servants in certain skills and occupational groups. It shall be removed as and when the problem is redressed”. Unlike in the past, the supply of the university graduates seeking employment in civil service has increased manifold. Except in the medical profession, many of the other fields which were once considered as having scarcity problems no longer have difficulties in getting new graduates to fill the vacancies. The main challenge today is the attraction and retention of employees, mainly in the field of medical, teaching, anti-corruption and audit due to the nature and public perception of the job. Since scarcity is not an issue any more, it is termed as a Professional Allowance instead of a Scarcity Allowance. The supply projection of the medical and teaching profession in the 11th FYP is given in the Annexure 6.

9.2.1.1 Professional allowance for Medical

In recognition of the importance of medical profession and their impact on the quality of health and related services for the general public, the government within its limited resources has been providing allowances over the years to attract and retain medical professionals. During the salary revision in 2009, a more benign allowance varying from 10-40 percent of basic pay was granted.

notwithstanding the likely impact on the delivery of quality health services but more in consideration of the resource constraints of the Government, no new allowances or revision of the existing allowances is recommended despite the strong representations for an upward revision of the Medical allowance.

9.2.1.2 Professional allowances for Teaching

The allowances for teachers are provided in order to attract and retain the best and brightest candidates and experienced teachers, and also for deployment of teachers to the difficult and remote areas. As of June 2013, the number of teachers has increased to 6,728, constituting about 28 percent of the civil service strength. More than 65 percent are working in 419 schools located in remote areas across the country. The recruitment, retention and deployment of truly dedicated teachers in remote areas is a major challenge for the education sector.

The existing teaching allowance of 10 to 20 percent is provided depending on the number of years served to attract and retain the right and dedicated candidates.

In view of the nature of job and the challenges in recruitment and retention, the Commission recommends to continue with the existing Teaching allowances but to further recognize and incentivize qualification and service seniority. It is recommended that teachers and lecturers


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with Masters and PhD degrees receive 10 percent higher Teaching allowances than those with Bachelors’ and below degrees.

The Education allowance is also applicable to the Royal university of Bhutan. The additional university allowance of 15 percent is however not recommended.

Table 9.3: Recommended teaching allowance

Position Level0-5 Year 6-10 Years 11 Years and above

Without Master Degree

With Master

Degree & Above


With Master

Degree & Above


With Master

Degree & Above

ES1 10,550 13,150 10,550 15,800 10,550 18,400

ES2 8,850 11,050 8,850 13,250 8,850 15,450

ES3 7,450 9,350 7,450 11,200 7,450 13,050

P1 5,900 7,350 5,900 8,800 5,900 10,300

P2 5,200 6,500 5,200 7,800 5,200 9,100

P3 4,550 5,700 4,550 6,850 4,550 7,950

P4 4,050 5,050 4,050 6,100 4,050 7,100

P5 3,300 4,150 3,300 5,000 3,300 5,800

9.2.1.3 Scarcity allowance for Mathematics and Physics Teachers

The expatriate teachers in mathematics and physics are currently provided 20 percent of basic pay as scarcity allowance which was instituted in 2009.

With sufficient numbers of Mathematics and Physics teachers, the Commission recommends withdrawal of the allowance.

9.2.1.4 Professional allowance for Royal audit authority

The auditors under Royal Audit Authority are paid 20 percent of basic pay to attract qualified candidates at entry level and to retain the experienced professionals in the organization.

The Internal Auditors (IAs) in the various agencies currently do not receive audit allowance. The recruitment and retention of IAs is a challenge and in some of the agencies, the Government has not been able to deploy adequate number of IAs. Furthermore, the responsibilities of IAs do not vary very much from RAA auditors, except that they operate as part of the management. They are mandated to conduct audits and reviews and provide the agencies with independent and objective assurance on the efficiency and effectiveness of governance, risk management, control and accountability. The IAs also propose and recommend improvements to the agency’s efficiency and effectiveness in terms of achieving the organizational objectives and proper use of public resource, greatly easing the work load of the RAA.


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The Commission recommends the same level of audit allowance for Raa, and the extension of this allowance to all Ias.

9.2.1.5 Professional allowances for anti-Corruption Commission

The officials in the Anti-Corruption Commission (ACC) are provided Professional Allowances in the form of Investigation and ACC Allowances. Of the 67 officials excluding Chairperson and Commissioners, 42 employees are eligible for Investigation Allowance at 45 percent of basic pay and the remaining 25 officials are eligible for the Professional Allowance of 20 percent.

While recognizing the difficult conditions under which the ACC has to operate, the Commission recommends to maintain the same levels of the Professional allowances for aCC.

9.2.1.6 Professional allowance for Department of Civil aviation (DCa)

To effectively fulfill safety oversight responsibilities for international civil aviation and to address the shortage of professionals, it is important to establish a competitive remuneration package for professionals in the DCA consistent with their education, technical knowledge and experience that is comparable to those in the industry whose activities they monitor and supervise as a basic principle practiced elsewhere.

The Commission recommends lumpsum allowance specifically for the Airworthiness Officer (AO) and Flight Operation Officers (FOO) of DCA.

Table 9.4: Allowance for AO & FOO under DCA

Position LevelNumber of Active Years of Service as FOO & AO

6-10 years 11-15 years Above 15 yearsP1 7,350 10,300 13,250

P2 6,500 9,100 11,700

P3 5,700 8,000 10,250

P4 5,100 7,100 9,150

P5 5,150 5,800 7,500

S1 3,850 5,350 6,900

9.2.2 House Rent allowances for Civil and Public Servants

In view of their important roles and responsibilities, some of the senior public and civil servants are provided rent free Government accommodation or in lieu thereof a House Rent Allowance varying from 20 to 30 percent of their basic pay. The Commission was not able to establish a basis for why some are provided Housing Allowance of 20 percent and while others get 30 percent. Based on the current market, public servants on an average spend around 20 percent


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of their salary income on house rents. The Housing Allowance is an additional benefit for certain positions only.

The Commission recommends that all public servants entitled for House Rent allowances be fixed as a lumpsum at 20 percent of the revised salary.

Table 9.5: Recommended Housing Allowance for Senior Officials

Sl. No.

Position Level NumberRecommended

Lumpsum Housing Allowance

1 Prime Minister 1 30,000

2 Cabinet Ministers 10 24,000

3 Speaker and Chief Justice of SC 2 26,400

4 Opposition Leader & Chairperson of the NC 2 24,000

5 Deputy Speaker of NA 1 15,120

6 Deputy Chairperson of NC 1 15,120

7 Members of Parliament 56 13,320

8 Drangpons of the Supreme Court 5 15,120

9 Chief Justice of HC 1 13,320

10 Drangpons of the High Court 5 12,640

11 Chairperson, RCSC 1 16,380

12 Chairperson, ACC 1 16,380

13 Chief Election Commissioner, ECB 1 16,380

14 Auditor General 1 16,380

15 Member of Constitutional Bodies 8 12,640

16 Chairman of Privy Council 1 24,000

17 Members of Privy Council 2 12,640

18 Attorney General 1 15,120

19 Thrompons 4 10,600

20 Cabinet Secretary 1 15,120

21 Government Secretary 10 13,320

22 Commission Secretary (GNHC, NLC & NEC) 3 12,640

23 Secretary General of NA & NC 2 12,640

25 Dzongdags 20 8,960

26 Drangpons of the Dzongkhags 26 8,960

27 Drangpons of the Dungkhags 15 7,060

28 Dungpa 15 7,060

29 Dzongrab 20 7,060

30 Executive Secretary of Thromdey A 4 8,960


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Assuming that all entitled officials are provided housing allowances, the estimated annual financial implication is Nu. 33 million.

9.2.3 House Rent allowance for other Civil and Public Servants

Access to affordable housing has become an issue for civil and public servants at lower levels, particularly those living in Thimphu, Phuentsholing, and Wangdue Phodrang. In Phuentsholing, many Bhutanese live across the border on the Indian side due to affordability and availability problems. For the civil and public servants higher up in the income ladder and for those living in other places of Bhutan, while increasing house rents and non-availability of housing stock are still considered as issues, the rents are considered to be still within manageable levels. The pay revisions, which make up for income erosion due to inflation including for housing, will mean that civil and public servants in general would not have to spend a disproportionate percentage of their pay on housing.

The need to provide affordable housing is an issue concerning really the low-income civil servants and particularly in places like Thimphu and Phuentsholing. Since house rent allowances have already been incorporated within the pay structures, introducing separate house rent allowances for all civil and public servants is neither affordable nor sustainable and it is unlikely to solve the real problem: the shortage of affordable housing for low-income groups. To address this problem, the government would have to intervene and find a way to channel investments into building up affordable housing stock, which the market has failed to provide.

In general, public servants renting National Housing Development Corporation (NHDC) and National Pension Provident Fund (NPPF) housing pay lower rents as compared to those who rent private buildings. The lower rents and open ended occupancy tenures of NHDC and NPPF housing have benefited those civil servants who have managed to get apartments. To extend the benefit to other civil servants, the Commission recommends fixing the occupancy tenure. The NHDC has already signed tenancy agreements for periods of two years renewable for a maximum of five times and encourage the civil servants owning private homes to surrender the quarters for the benefit of other civil servants. Similar approach could be initiated by NPPF.

The Commission further recommends that the government find a way to enhance investments in low income housing by bringing the NPPF (for financial resources), the NHDC (for construction and management) and the NLC (for provision of land to make investments in low income housing feasible) together to increase the supply of affordable housing for low income groups starting with Thimphu, Phuentsholing, and other parts of the country where it is determined to be necessary as soon as possible. Where possible, public private partnerships should also be explored, incentivized and promoted.


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9.2.4 Officiating Allowance

As per BCSR 2012, the Officiating Allowance is paid to those who are officiating managerial positions of level P1 (without sub-levels) and above including Heads of Institutes subject to conditions stated in BCSR 2012. However, while the financial implications are not very high, it is possible that such tasks can be carried out without financial incentives like in the past.

In lieu of Officiating Allowances, the Commission recommends that meritorious or outstanding certificates in recognition of their contributions be credited for purposes of consideration of postings, trainings and promotions.

9.3 Discretionary Grants

Discretionary grants, that are not taxable, are provided for certain levels of civil and public services. These grants are supposed to be used at discretion during travel within the country towards soelras and other such incidental expenses, for which the government should neither be providing separate budgets nor accepting claims.

Table 9.6: Annual Discretionary Grants (In Nu. )

Sl.No. Position Level Strength AmountAnnual Implica-

tion1 Prime Minister 1 300,000 300,000

2 Speaker of NA 1 200,000 200,000

3 Chief Justice of SC 1 200,000 200,000

4 Cabinet Minister 10 200,000 2,000,000

5 Chairperson of NC 1 200,000 200,000

6 Opposition Leader 1 200,000 200,000

7 Chairperson of Privy Council 1 200,000 200,000

8 Member of Parliament 58 100,000 5,800,000

9 Dzongdags 20 50,000 1,000,000

TOTAL 10,100,000

It is recommended that such allowances be in future merged with the pay structures to work towards a “clean” wage bill. Meanwhile, the Commission recommends for continuing with the present Discretionary Grants. However, such grants should be treated as income of the benefiting public servants and liable to be taxed.

9.4 Foreign Service Entitlements

The objective of providing Foreign Service Entitlements is primarily to ensure that our diplomats can live and represent our country abroad with dignity. The diplomats and home based staff posted to Missions abroad are entitled to salary and other Foreign Service benefits in the form of Foreign Allowance, Representational Grant, Children’s Education Allowance, Home Leave


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Passage, Bereavement, Emergency Evacuation and Loss, Medical Treatment, Accommodation and Furnishing, Utilities, Domestic Help, Transfer Grant, Transport of Personal Effects, and Vehicle Hire and Mileage Claim.

A non-diplomatic civil servant posted abroad is eligible for the same allowances and other benefits, except for the Representation Grant and domestic help. A local recruit in the Embassy/ Mission/Consulate is eligible for remuneration and other benefits as per the Foreign Service Entitlement Rules and Regulations (FSERR).

The FSERR was revised in 1999 and incorporated in the BCSR 2002. The BCSR 2012 has a provision for the FSERR to be reviewed periodically by the Ministry of Finance, Ministry of Foreign Affairs and the RCSC. Meanwhile, a number of administrative issues have surfaced in the implementation of the FSERR.

The Commission recommends the rationalization of the following in the FSERR:

i. all pay and allowances of diplomats, non-diplomats and local recruits abroad to be denominated in local currency of that country;

ii. No revision of the Representational Grant (RG) while the need for accounting of 50 percent of RG be done away with;

iii. The rental ceiling issues be taken up with the Government on case by case basis as this is not an allowance;

iv. Invest in housing for staff of the Missions/Embassies/Consulates;

v. Provide Children Education allowances notwithstanding the place of schooling;

vi. leave Travel Passage by full fare economy or in lieu thereof a lumpsum allowance;

vii. with regard to Carriage of Personal Effects:

a. a 20 feet container where there is no surface road connection or two trucks for diplomats and one truck for others where there is road connection; and

b. air/Surface charges for 250 kgs of personal effects for diplomats and 100 kgs of personal effects for others (excluding free baggage allowances).

In lieu of claims at actual for some of the allowances, the Commission recommends monetization as per lumpsum provisions (annexures 7 – 10).

The Commission further recommends the revision of Foreign Service Entitlement Rules and Regulations with the incorporation of the above.

9.5 Travelling Allowance

The objective of Travel Allowances such as Daily Allowances for both in-country and ex-country is to facilitate civil servants to travel if required by the job and to compensate them


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adequately for travel expenses.

The expenditure trends of the recent past years clearly show that travel expenditures are alarmingly high with some of the agencies and also as a percentage of the overall budget provisions. The perception is growing that “table” tours are common and claims are based on the outdated dholam and porter pony systems although not in actual use for the most part. It is also reported that some civil servants in a few agencies make travel claims like any other entitlement whether tours are undertaken or not. Such perceptions may not be true but if they are, these practices should be done away with immediately through stringent control and monitoring at the appropriate levels.

The expenditure of the Government towards travel has averaged Nu. 1.382 billion per annum during the last four years, and this constituted over 18 percent of the total budget outlay for salary and allowances. In FY 2012-13, the travel expenditure of the Ministry of Agriculture and Forest (MoAF) was the highest at Nu. 252 million, which constituted 38 percent of their pay and allowances. This was followed by the Ministry of Home and Cultural Affairs (MoHCA) including the Royal Bhutan Police with an expenditure of Nu. 84 million. This excluded travel expenditures of the same sectors at the Dzongkhag and Regional levels. At the Dzongkhag level, travel budget on an average constituted about 20 percent of their pay and allowances. The lower levels of travel expenditures at the Dzongkhags could be on account of the largest contingents of employees being in the Education sector that do not travel that frequently, but these were still higher than the national level travel expenses.

The Commission recommends that all travels, irrespective of funding, be scrutinized for their purposes and necessity at the appropriate government machinery levels. The upward revision in Da is further recommended to be met through rationalization of the overall government expenditure on travel and for capping such travel expenses within 15 percent of the pay bills. This could be further rationalized considering the experiences in the corporate and private sectors.

9.5.1 Daily allowance (Da) – In-country

The DA for travel within the country was last revised on 1st January 2000. While the cost of living in the country has increased substantially since then, the DA has remained the same.

Table 9.7: Existing In-country DA

Sl. No. Position level Daily Allowance

1 EX1/ES1 to EX3/ES3 Actual lodging in one room plus Nu. 500 or lumpsum DA of Nu. 800

2 P1 to P5 Lumpsum Nu. 500

3 S1 to S5 Lumpsum Nu. 300

4 O1 and below Lumpsum Nu. 150


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Note:

1. The actual lodge charges shall be paid subject to production of original bills;

2. When lodge is provided, 50% of the lumpsum DA shall be paid to civil servants of grade 4 & below; and

3. When both food and lodge are provided, 20% of the lumpsum DA shall be paid.

Full DA is paid only for the first 30 days of continuous halt on duty at one particular place. After 30 days, only 50 percent of the DA is admissible for a maximum period of five subsequent months. No DA is paid for continuous stay beyond 6 months.

The existing DA rates for travelling within the country are not sufficient to meet the travel expenses of officials on tour. Inflations for food & restaurant and hotels have increased since 2000 by 89 percent and 83 percent respectively. Based on some market surveys, hotel room charges now cost at least Nu. 500 per night and a simple meal in standard hotels and restaurants cost Nu. 200.

while noting the concerns of the high expenditures on travel and on inadmissible claims, the Commission still recommends to increase Daily allowances for in-country travel in view of the increased costs of travel.

Table 9.8: Recommended In-country DA

Sl. No. Position level Daily Allowance

1 Ministers, equivalent ranks, Consti-tutional office holders, Government Secretaries and EX/ES-1 to EX/ES-3

Actual lodging in one room (maximum of Nu. 3,000) plus Nu. 800 or lumpsum DA of Nu. 1,500

2 P1 to P5 Lumpsum Nu. 1,000

3 S1 to S4 Lumpsum Nu. 750

4 O1 to O4 and below Lumpsum Nu. 500

Note:


2. When lodge is provided, 50% of the lumpsum DA shall be paid to civil servants of grade 4 & below; and

3. When both board and lodge are provided, 20% of the lumpsum DA shall be paid for incidental expenses.

4. When food and lodge and out of pocket expense amount is provided, no DA shall

be paid.


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An official returning to duty station on the same day from site visits beyond 40 km shall be eligible for half DA.

9.5.2 Daily Subsistence allowance (DSa) in India

DSA in India was last revised from 1st July 2000.

Table 9.9: Existing DSA in India

Sl. No. Position level State Capital Other Places

1 EX1/ES1 to EX3/ES3

Actual lodging for one room plus DA of Nu. 1,500 or lumpsum DA of Nu. 4,000

Actual lodging for one room plus DA of Nu. 1,000 or lump-sum DA of Nu. 3,000

2 P1 to P2 Actual lodging for one room plus DA of Nu. 1,000 or lumpsum DA of Nu. 3,000

Actual lodging for one room plus DA of Nu. 750 or lumpsum DA of Nu. 2,000

3 P3 to P5 Lumpsum Nu. 2,500 Lumpsum Nu. 1,500

4 S1 to S5 Lumpsum Nu. 1,500 Lumpsum Nu. 1,000

5 O1 and below Lumpsum Nu. 1,000 Lumpsum Nu. 800Note:


2. Officials in grades 1,2 and 3 are entitled to 5 star hotels and officials in grades 4 and 5 are entitled to 3 star hotels;

3. The above rates are not applicable beyond 30 days. Officials requiring to stay be-yond 30 days shall be required to find cheaper accommodation and the DSA and lumpsum DSA shall be reduced to 50 percent;

4. When lodge is provided, 50% of the lumpsum DSA shall be paid to civil servants of grade 6 and below; and

5. When both food and lodge are provided, 20% of the lumpsum DSA shall be paid.

The present DSA rates in India are not sufficient to meet the expenditures incurred by officials travelling to India.

The Commission recommends to revise DSa rates in India considering the huge increases in travel expenses mainly on account of inflation since the last revision.


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Table 9.10: Recommended DSA in India

Sl. No. Position Level State Capitals Other Places1 Ministers, equivalent ranks,

Constitutional office hold-ers, Government Secretaries and EX/ES-1 to EX/ES-3

Actual one room lodg-ing (maximum of Nu. 15,000) plus Nu. 2,800 or Lumpsum Nu. 7,500

Actual one room lodging (maximum of Nu. 10,000) plus Nu. 2,000 or Lump-sum Nu. 5,500

2 P1 to P5 Lumpsum Nu. 5,500 Lumpsum Nu. 3,500

3 S1 to S5 Lumpsum Nu. 3,500 Lumpsum Nu. 2,000

4 O1 to O4 and below Lumpsum Nu. 2,500 Lumpsum Nu. 1,500

Note:


2. Ministers, equivalent ranks, Constitutional office holders, Government Secretaries and EX/ES-1 to EX/ES-3 are entitled to 5 star hotels;

3. The above rates are not applicable beyond 30 days. Officials requiring to stay be-yond 30 days shall be required to find cheaper accommodation and the DA and lumpsum DA shall be reduced to 50 percent;

4. When lodge is provided, 50% of the lumpsum DA shall be paid to civil servants; and when both food and lodge are provided, 20% of the lumpsum DA shall be paid.

5. When food or lodge and out of pocket expense amount is provided, no DSA shall be paid.

9.5.3 Daily Subsistence allowance (DSa) for Countries Other Than India (COTI)

The DSA rates for COTI were revised in September 2002 based on the UN’s DSA rates prevalent at that point in time. Since, the cost of living in many cities around the world, especially in Europe and the Americas, have increased substantially since then, the present DSA rates needs revision.

The Commission recommends for revision of DSA rates for COTI as placed at Annexure 11.

At present, a civil servant on transit for 8 hours or more for the next flight while on travel abroad is eligible for full DSA. The Commission recommends for full DSA on overnight basis. A terminal allowance of USD 50 to cover airport transfers per halt except for transit is also recommended.

The Commission further recommends that officials in EX1/ES1 and above be given the option to claim actual room charge (maximum of twice the DSA of that country) and 50 percent DSA or full DSA.


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9.5.4 Travel allowance (Ta)

The mileage rate for travelling within the country was last revised on 1st July 2007.

Table 9.11: Existing Mileage Rate

Sl. No. Position Level Existing TA (1st July 2007)

1 EX1/ES1-P5 Mileage for 4 wheeler vehicle @Nu. 14/km or bus fare as ap-proved by the Government

2 S1-S4 Mileage for 2 wheeler vehicle @Nu. 4/km or bus fare as approved by the Government

3 S5-O4 Bus fare as approved by the Government

Since the cost of transport has increased substantially due to hike in fuel prices and cost of new vehicles, it is recommended to revise the mileage rates.

Table 9.12: Recommended Mileage

Sl. No. Position Level Recommended TA

1 EX1/ES1-P5Mileage for 4 wheelers Nu. 16/km or bus fare as approved by the Government

2 S1-S5Mileage for 2 wheelers Nu. 6/km or bus fare as approved by the Government

3 O1 and below Bus fare as approved by the Government

In view of improved transport systems, the minimum travel distance for claiming mileage is recommended to be increased from 10 km to 40 km from the duty station.

9.5.5 Porter and Pony Charges

Civil servants are eligible to claim Porter and Pony charges to meet transportation costs while on tours or on transfer to places where there are no motorable roads. This was considered when much of the rural areas and many of the Dzongkhags were not connected by motorable roads.

Table 9.13: Existing entitlement of Porter and Pony

Sl.No. Position Level Riding Pony with Syce Porter1 EX1/ES1 to EX3/ES3 1 3

2 P1 to P5 1 2

3 S1 to O4 1 1


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Table 9.14: Existing Porter and Pony Charge Rates

Sl. No. Description Rate per day (Nu.)

1 Riding pony with syce 450

2 Pack pony 300

3 Porter 150

Most of the Gewogs and villages are today connected by motorable roads. However, while there is very limited need to use the porter and pony system for transportation, the civil servants continue to claim porter and pony charges using the outdated dholam system as a basis.

The Commission recommends to do away with existing practice of porter/pony system together with the Dholam system. This is recommended to be replaced by actual expenses as may be incurred and verified depending on the nature of travel.

9.5.6 Ta/Da of local Community leaders

Representatives of the Local Governments are eligible for TA/DA to attend DYT and when required by the Dzongkhag to attend important government functions such as meetings, workshops and trainings. They are not entitled to daily TA/DA for travels within their Gewog for which Gups and Mangmis are paid annual lumpsum TA/DA allowance of Nu. 6,000 and Nu. 4,500 respectively.

Table 9.15: Existing TA/DA of LG

Description Gup Mangmi Geydrung Tshogpa/Chipon

DA (Within the Dzongkhag) Nu. 500 Nu. 300 Nu. 300 Nu. 150

TA on non-motorable route per day or actual bus fare on motorable routes

Nu. 250 Nu. 250 Nu. 250 Nu. 250

MileageActual bus

fareActual bus

fareActual bus

fareActual bus fare

Considering increases in costs and inflation, the Commission recommends for revision of the TA/DA for the LG functionaries while travelling outside their Gewogs. It is also recommended to revise the lumpsum TA/DA allowances for the Gups and the Mangmis for travel within their Gewogs.


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Table 9.16: Recommended TA/DA of LG

Description (In Nu.) Gup Mangmi Gedrung TshogpaDA within Bhutan outside of Gewog)

Nu. 750 Nu. 500 Nu. 500 Nu. 300

TA on non-motorable route per day or actual bus fare on motorable routes

Nu. 250 Nu. 250 Nu. 250 Nu. 250

1. For travel outside Bhutan, the allowances will be at par with Supervisory level of the civil service.

2. For travel within Gewog for monitoring plan activities, the lumpsum amount has been raised from Nu. 6,000 to Nu. 18,000 per annum for Gups and for Mangmis from nu. 4,500 to nu. 13,500 per annum.

9.5.7 Carriage charge of personal effects

The carriage charge of personal effects is provided to civil servants while on transfer and retirement. The existing carriage charge was revised in 2000. If vehicles are arranged by office for transportation of personal effects, the hire charges shall not be admissible.

Table 9.17: Carriage charge of personal effects

Sl. No. Grade level Quantity Rate Amount

1 1 to 3 2 trucksAs per RSTA

Nu. 55,000

2 4 to 8 1 truck Nu. 27,000

3 9 and below 1 DCM or equivalent Nu. 15,000

The requirement by BSCR 2012 for a civil servant to get transferred after every five year is resulting in huge financial implications to the Government. While regular transfers are desirable for certain professions or positions, in order to reduce financial burden on the Government, the periodic transfer needs thorough review for certain categories of employees.

although it has been 14 years since the last revision, no revision is recommended as the existing rate and scale adequately covers the transportation cost of personal effects.

9.6 Tax Free Vehicle Quota for Public Servants

The system of providing foreign vehicle quota was introduced in 1980s, at a time when public transport, buses and taxis were almost non-existent. The main objective was to facilitate the import of foreign vehicles by public servants and to minimize the pressure on limited number of government pool vehicles. It was also aimed at easing the mobility of the public servants while conducting their official duty and to standardize the import of the foreign vehicles in the country.


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Civil servants in P3 level and above and other senior public servants are provided import duty exemption vehicle quota once every seven years. In 2009, the tax exemption ceiling was fixed at Nu. 800,000 to discourage the import of high valued vehicles and its corresponding impact on the foreign reserves. Import values of vehicles exceeding the ceiling were made liable to pay tax at the prevailing tax rates.

Table 9.18: Number of Tax Free Vehicle Quotas

YearQuota Issued Quota Used/Imported Quota not Used

COTI* India Total COTI India Total COTI India Total2000 141 - 141 124 - 124 17 - 17

2001 144 - 144 131 - 131 13 - 13

2002 215 - 215 181 - 181 34 - 34

2003 256 - 256 241 - 241 15 - 15

2004 212 - 212 204 - 204 8 - 8

2005 236 - 236 214 - 214 22 - 22

2006 225 - 225 186 - 186 39 - 39

2007 561 - 561 384 - 384 177 - 177

2008 507 28 535 390 23 413 117 5 122

2009 372 7 379 274 4 278 98 3 101

2010 708 25 733 376 5 381 332 20 352

2011 793 4 797 147 1 148 646 3 649

2012 247 - 247 91 - 91 156 - 156

TOTAL 4,617 64 4,681 2,943 33 2,976 1,674 31 1,705

* COTI – Countries Other Than India

Although 4,681 quotas were issued in the last 13 years (2000-2012), only about 2,976 quotas were used to import vehicles. Of the total, about 43 percent were issued prior to introduction of tax exemption ceiling and all the vehicles were imported from third countries. With rapid growth in the number of civil and other public servants, and with the implementation of Position Classification System (PCS), there has been corresponding increase in the issuance of quota. In the last five years, on an average about 538 quotas were issued annually which is about 50 to 60 percent of third country annual vehicle import. In 2012, due to the Indian Rupee shortage in the economy, the Government suspended quota issuance as part of its measures to reduce imports. Even after its suspension, the Ministry of Finance received around 410 quota applications by the end of December 2013.

Financial Cost of Vehicle Quota to the Government

The provision of duty exemption vehicle quota to the civil and public servants has had significant financial implication to the government in terms of tax revenue forgone. A simple calculation of the revenue losses through exemption for 1,311 vehicles imported from 2008 to


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2012 is estimated at Nu. 423.960 million. Furthermore, the imports also depleted the reserves by about USD 41.757 million, which is about 1.5 times the annual interest payments made by the government to the international financial institutions and other bilateral development partners. The average tax revenue foregone per imported vehicle is estimated at Nu. 0.344 million and it also has other consequential impacts on import of fuel and spare parts.

Table 9.19: Financial Cost of Vehicle Quota

Description 2008 2009 2010 2011 2012 Total

Number of Quota Issued 535 379 733 797 247 2,691

Number of Quota Used/ vehicles imported

413 278 381 148 91 1,311

Quota Balance/Not Used 122 101 352 649 156 1,380

Ceiling on Quota (In. Nu.) 800,000 800,000 800,000 800,000 800,000

Tax on Third Country Vehicle 35% 35% 45% 45% 55%

Tax on India Origin Vehicle 15% 15% 20% 20% 20%

Exemption on Third Country Vehicle

0.280 0.280 0.360 0.360 0.440

Foregone Revenue (Nu. in millions)

115.640 77.840 137.160 53.280 40.040 423.960

Reserve Used (in million USD)

13.155 8.855 12.135 4.714 2.899 41.757

It is common knowledge that most of the civil and public servants sell their vehicle import quota to private individuals due to lack of equity financing. As a result, the selling of quota has had multiplier impact on the import of vehicles. The private individual who has purchased the quota imports a vehicle from a third country while the public servant who has sold the quota uses the proceeds of the quota to purchase cheaper vehicles. This has led to import of two vehicles under a single quota, which increased the vehicle imports in the past decade.

Consequently, the imports relating to fuels, spare parts and car accessories have increased tremendously, further impacting convertible and Indian rupee reserves.

The vehicle quota was introduced with noble intentions but the results were anything but what was expected. Despite vehicle quotas being issued, the pool vehicle system flourished. Over the years, the abuse of vehicle quota systems negatively impacted revenues to the Government, increased number of vehicles that were imported further straining foreign reserves, and consequentially imports of spares and petroleum products increased.

Since in any case, the vehicle quota system has evolved into an entitlement that enhances the income of those who sell the quotas, the Commission recommends that the vehicle quota system be discontinued and in lieu thereof lumpsum financial incentives be provided.


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Basis and Recommendation for lumpsum incentives

A detailed analysis suggests that the Government would benefit by providing cash compensation in lieu of current tax exemption ceiling of Nu. 0.800 million, as the government could earn tax revenue of Nu. 0.440 million per vehicle, from third country vehicle imports as per current the trends. In lieu of current quota, if the government were to provide a lumpsum financial incentive equivalent to 20 percent tax on the Indian origin cars (Nu. 0.160 million), the net gain to the Government would be around Nu. 0.280 million per vehicle if imported from third countries. Even otherwise, other benefits such as protection of reserves, reduction in import of fuel and car accessories, reduction in traffic congestion, and reduction in environmental pollution would accrue to the country as a whole. As the period for entitlement quotas is once every 7 years, the lumpsum amount is recommended to be granted to the entitled civil servants every 7 years.

With the recommended monetization, the financial implication of the cash incentives for the 1,705 unused quota and 410 pending quotas will be about Nu. 338.400 million. The annual cost implications to the Government for those civil and public servants for whom the quotas would become due is projected at Nu. 116.800 million. With the implementation of the recommendation, all quotas that have not been used should be allowed to be monetized within a set time frame beyond which the quotas would become invalid. This scheme should be applied across the board for all public servants; and this would entail the amendment of some of the provisions of the Parliamentary Entitlement Act 2008 and the Judicial Services Act 2007.

Table 9.20: Projection on Vehicle Quota, Financial Implication and Net Savings

Description2000-2013

Balance2014 Proj.

2015 Proj.

2016 Proj.

2017 Proj.

2018 Proj.

Total

Eligible Public Servants

2,115 730 730 730 730 730 5,765

Average Annual Entry in P3 & Level

500 500 500 500 500 2,500

Quota Eligibil-ity every after 7 years

230 230 230 230 230 1,150

Foregone Rev-enue at Existing at Ceiling (Nu. in millions)

930.60 321.20 321.20 321.20 321.20 321.20 2,536.60

Cash Compen-sation (Nu. in millions)

338.40 116.80 116.800 116.80 116.80 116.80 922.40


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Net Saving (Nu. in millions)

592.20 204.40 204.40 204.40 204.40 204.40 1,614.20

Net Saving (USD in mil-lions)

9.62 3.32 3.17 3.03 2.90 2.77 24.83

The Commission therefore recommends a time-bound monetization of all unused vehicles quotas and a lumpsum financial incentive of Nu. 160,000 in lieu of vehicle quotas as and when the quotas become due.

While the Holders, Members and Commissioners of the Constitutional Bodies are entitled for chauffer driven duty cars, there is no mention of duty free vehicle quota under their Service Entitlements Act. The Commission recommends that the Holders, Members and Commissioners of the Constitutional bodies also be entitled to a lumpsum grant of nu. 160,000 for each term.

Since the Cabinet Ministers and equivalent post holders as well as Dzongdags are entitled for designated duty vehicles, they will not be entitled to this lumpsum incentive.

9.7 Non-Monetary Benefits (NMBs)

The use of NMBs can complement pay and allowances and thus help to attract, retain and motivate people. Therefore, the government should try and introduce such benefits from time to time. As the private sector looks up to the government as a model employer and seeks to emulate what it does, good practices can have positive impact beyond the public sector.

Today, one area where public servants face challenges is in raising a family. Women in particular face a sacrificial choice between career and family, but this should not have to be the case since the outcome of such choices could negatively impact the overall development prospects of the country. We need families to raise the future citizens of Bhutan as much as we need all hands on deck to secure our future as well as that of our children. Therefore, policies that help to reduce such dilemmas are important.

In that direction, the Commission recommends that paid paternity leave be extended to 15 working days and paid maternity leave be extended to 6 months for every childbirth. In the event of miscarriages, 5 days paid leave is recommended for the couple to recuperate from the physical and psychological trauma.

Further, one of the greatest challenges for parents who work in offices is caring for their young children until they attain school going age. This is a challenge that is expected to grow as both husband and wife going to office becomes the norm. To address this challenge, which will also reduce stress and costs on parents, it is recommended that offices, based on critical mass, provide a space to be used as a crèche for parents to be able to keep and look after their children. It is also recommended, given the growing problem of raising a young family, that the government explore the possibility of subsidizing and establishing day-care centers for public servants as well as giving tax exemptions for such expenditures.


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Also, both as an activity to promote healthy lifestyle (and thus reduce healthcare costs for the exchequer) as well as to promote bonding and team building within the public service, it is recommended that appropriate annual budget provisions be kept for participating in team sports tournaments such as archery, khuru, football, basketball, volleyball, cricket, etc. from the overall current budget they are provided.

It is recommended that appropriate rules and regulations be framed by the relevant authorities to incorporate these nMBs.


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10 GOVERNMENT POOL VEHICLE

Background

The Government Pool Vehicle3 System was introduced for efficient and effective delivery of public service through enhanced mobility. All government ministries and agencies are allotted certain numbers of pool vehicles to be used for official purposes. The Government has also laid out regulations4 governing the pool vehicles usage. Senior officials such as Prime Minister, Cabinet Minister, and Holders, Members and Commissioners of Constitutional Offices, Cabinet Secretary, Government Secretaries, Commission Secretaries, Joint Secretaries, Attorney General and Secretary General of National Assembly and National Council, and Dzongdags, Thrompons, Members of Privy Council and Dzongkhag Drangpons are entitled and provided with a designated duty vehicle along with a driver. In addition to designated vehicles, based on the requirements and functionalities, the various agencies of the government are provided common pool vehicles.

The number of pool vehicles in the Government has increased over the years with expansion of public offices especially in the last 5 to 6 years during the transition to democratic constitutional monarchy system. There were at least 960 vehicles in the Government at the beginning of 10th FYP (2008) excluding vehicles under the Royal Bhutan Police and two wheelers. In 2013, the total number of vehicles in the Government was 1,484. The number of pool vehicles increased by 11 percent annually on an average in last decade and highest growth was observed in 2008 at 21 percent.

Of these 1,484 government pool vehicles; 441 are special purpose vehicles that include ambulances, buses, protocol duty cars, trucks and DCM and other utility vehicles; 111 are designated vehicles (DV) for senior government officials; and the balance 932 vehicles are with various agencies as common pool vehicles (CPV). Of these pool vehicles, 33 percent were procured prior to 2003 and about 47 percent within last six years. In terms of distribution by location, around 57 percent (530 vehicles) are in Thimphu followed by Paro (5.9 percent), Trashigang (5 percent), Samdrup Jongkhar (4.5 percent), Bumthang (3.3 percent), abroad (1.5 percent) and the rest in other Dzongkhags. Of the 932 CPVs, 440 CPVs are located in Thimphu.

3.The government pool vehicles includes vehicles used by government agencies including constitutional bodies, judi-ciary, and but excludes RBP & government owned corporations. It also excludes two wheelers.4.Rules on the Use of Pool Vehicles, 2000 & 2001.

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Table 10.1: Number and Recurrent Cost of Pool Vehicles

Description

10th FYP Budget

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Actual Actual Actual Actual Revised Budget

Number of Pool Ve-hicles*

960 1,112 1,224 1,383 1,453 1,484

Recurrent Cost 337.056 418.899 467.704 560.819 620.091 582.757

Maintenance** 204.734 235.928 264.240 295.923 341.269 292.420

Driver’s Remunera-tion/Operating Cost

132.322 182.971 203.464 264.896 278.822 290.337

Salary 68.287 80.681 112.987 130.218 139.545 145.373

Salary Allowance - 26.610 - 21.795 19.868 20.292

LTC 5.691 6.723 9.416 10.852 11.629 12.114

LE 5.691 6.723 9.416 10.852 11.629 12.114

PF 7.512 8.875 12.429 14.324 15.350 15.991

Retirement 1.366 1.614 2.260 2.604 2.791 2.907

Travel 21.600 25.020 27.540 31.118 32.693 33.390

Overtime 22.176 26.726 29.417 43.135 45.318 48.155

Unit Recurrent Cost 0.351 0.377 0.382 0.406 0.427 0.393

Vehicle Rental 11.775 9.969 12.441 21.786 13.321 18.277

*Excludes two wheeler; **Vehicle maintenance expenditure in FY 2013-14 excludes RBP vehicles.

The total recurrent cost on vehicles for the 10th FYP was Nu. 2.405 billion (Nu. 1.342 billion for maintenance and Nu. 1.062 billion for operations). The share of recurrent cost of pool vehicles was about 3 percent of total current expenditure in the 10th FYP. While the share to total recurrent expenditure was maintained at 3 percent, the absolute amount has increased by 75 percent during the 10th FYP as compared to the 9th FYP. The same share is maintained for the FY 2013-14 and is budgeted at Nu. 582.75 million excluding cost related to rental and purchase of new vehicles. The unit recurrent cost for a vehicle has been increasing annually an averaged about Nu. 0.393 million during the 10th FYP. The pool vehicle system therefore does have a huge financial burden on the exchequer.

Although pool vehicles facilitate effective and efficient service delivery, it is also subject to misuse, which is the general perception of the public. Within the public servants, it is viewed as discriminatory as it has become more like a designated vehicle for the senior officers and its limited access to lower level civil servants. The Commission reviewed the existing system and explored the possibility of replacing it with a suitable alternative.

The Commission explored several options (some of which had already been tried but failed


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such as centralization, and strict enforcement of rules) and recommends that a more radical but targeted approach be adopted, which is to withdraw all pool vehicles. A simple cost benefit analysis on withdrawal of 932 common pool vehicles yield an annual financial benefit of Nu. 378.897 million from recurrent costs. Any new arrangement would also have the benefit of drastically reducing, if not eliminating, the misuse of pool vehicles with the corresponding savings.

The Commission therefore recommends the total withdrawal of the 932 common pool vehicles (CPv) from the various agencies. Designated vehicles are recommended to be provided only for the PM, Chief Justice of Bhutan, Cabinet Ministers, Speaker of na, Chairperson of nC, Ol, Chairperson of Privy Council and Dzongdags. The vehicles designated to the 75 other senior public servants are recommended to be withdrawn, and in lieu thereof provide them with the onetime lumpsum conveyance grant of nu. 700,000 similar to the MPs with the driver and fuel allowances.

This will help in reducing the number of pool vehicles from 1,484 to 448, thereby reducing the recurrent and capital cost of vehicles in annual budget. The provision of a grant instead of designated vehicles to the 75 other entitled senior officials for designated vehicles would bring cost savings to the Government through reduction of recurrent and capital cost of vehicles.

Table 10.2: Replacement of Designated Pool Vehicles by Allowances (in Nu.)

Description NumberOne time Allowance

Financial Implication (4 Years)

Cost of Existing System

Total Recurrent Cost 75 30,487,405.87 121,949,623

Total Cost of New Proposal (LCG) 134,165,554

Lumpsum Amount Per Designated Pool Vehicle

75 700,000 52,500,000

Lumpsum Vehicle Quota 75 160,000 12,000,000

Vehicle Maintenance Allowance for 4 years

75 6,300,000 25,200,000

Driver Allowance for 4 years 75 5,400,000 21,600,000

Hire Charge (20% of 75 DV) 75 5,716,388.6 22,865,554

Plus Sale Proceeds @ Nu. 1.0 million/vehicle

75 75,000,000 75,000,000

Net Financial Gain (4 yrs) 62,784,069.06

In order for this initiative to be effective, it is very important that the Government make no exception for any category of officials.


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The withdrawal of the pool vehicles should be undertaken in a phased manner for which a proper Business Plan would have to be endorsed by the Government. The government should initially withdraw all pool vehicles in Thimphu and establish a corporation that will manage the government vehicles. The government should transfer all pool vehicles along with the drivers to the newly established corporate body and this corporate body should be able to sustain itself through renting of vehicles to the government as and when it is required. Over time, the government should withdraw the pool vehicles of other Dzongkhags and bring the management under this corporate body. Similar system could be replicated for SOEs.

The Commission further recommends that the old vehicles be auctioned either before handing over to the corporate body to be set up or the corporate body should take such decisions based on financial viability. The drivers of these vehicles should be given preference to be employed in various large projects of the Government to protect their livelihood. Special care should be taken to ensure that drivers living in government quarters are allowed to continue even after their transfer to the corporation.


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11 POST SERVICE BENEFITS

11.1 Public Service Pension Benefit

11.1.1 Introduction

The Government set up the National Pension and Provident Fund Plan considering that pension benefits would be crucial to the well-being of civil servants and their families. The Plan is a two tiered partially funded pay-as-you-go system fully guaranteed by the Government. It comprises of a Pension Plan and a Provident Fund Plan. The objectives of the Government in designing the retirement schemes are as under:

� Make the public service attractive

� Retain qualified, competent and efficient public servants

� Look at civil service as long-term career

� Help establish a clean government by curbing corruption and promoting professionalism

� Reward civil servants for their dedication and loyalty

� Help civil servants retire with security and dignity

11.1.2 Pension benefit payout and benefit level

Pension benefits are paid on the final salary defined by a formula.

Table 11.1: Pension Formula

Parameters Civil Service Armed Forces

Benefit level 40% of final salary 45% of 12 months average salary

Benefit Formula 40% X final salary X No. of Years of Contributory service divided by 30 years

45% X Average of final 12 months’ salary X No. of Years of Contributory service divided by 27 years

Minimum contribu-tion years

10 years 10 years

Contribution rate 16% of salary 15% of salary

Other benefits Disability, Spouse, children, orphan, dependent parent

Disability, Spouse, children, orphan, dependent parent

Currently, the Pension Plan has 3,960 pensioners representing 8.08 percent of total contributing members of 48,996. Since the inception of the Plan, the NPPF has disbursed a total pension benefit of Nu. 723.04 million. The Pension Plan is a partially funded since the contribution

11 POST SERVICE BENEFITS


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rate is only 16 percent of basic salary against the required contribution rate of 35 percent if the Plan has to be financed on a fully funded basis. The existing contribution rates and accumulated assets are therefore not adequate to finance the future pension obligations.

Table 11.2: Gross Benefit Level of Post-retirement Income Security

Position LevelNPPF Employer

TotalPension

Provident Fund

Gratuity

EX/ES1 40% 10% 14% 64%

P1 40% 10% 24% 74%

S1 40% 10% 24% 74%

O1 40% 10% 24% 74%

Weightage 56% 14% 30% 100%

11.1.3 Impact of pay consolidation or pay revision

The existing Civil Pension Plan is paid at 40 percent of final salary and the pension benefit is adjusted to annual inflation or 5 percent p.a. whichever is lower to protect the purchasing power of the pensioners. The maximum pension is currently fixed at 40 percent of the maximum pay scale of EX1 of the civil service.

Table 11.3: Pension benefit level due to pay revision

Position LevelAverage basic pay Pension Benefit level

Existing Current pension After pay revision

EX1/ES1 52,723 21,089 29,056

P1 29,435 11,774 16,222

S1 15,293 6,117 8,428

O1 10,395 4,158 5,729

11.1.4 Cost of pay revision on the sustainability

Since the pension benefits are paid on the final salary, the pay revision in the civil service will affect the sustainability of the Plan. It is anticipated that the sustainability of the Pension Plan will reduce but only marginally considering the overall additional contributions from the higher basic pays.


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Figure 11.1: Current balance (inflow minus outflow)

As the current population is young, the Plan has enough assets to finance the additional pension benefits. The Government therefore would not have to finance the shortfall amount for now. Projections show that the depletion of fund will start after 2033 with the outflows exceeding inflows, for which NPPF would have to initiate reform measures from time to time to ensure that the deficit is maintained at a minimum level.

11.2 Measures to Enhance the Sustainability of Pension Plan

The Commission recommends the following measures in order to minimize the impact of pay increase on the sustainability of the Pension Plan and the liabilities that could accrue to the government in future.

11.2.1 Reconsideration of Pension Formula based on 24 months average salary

It is recommended that the pension formula and pension payments be based on the “average of the last 24 months basic salary” instead of “last salary”. This is proposed since the pension benefit based on final salary is highly sensitive to the pay revision.

As per the First Pay Commission’s recommendation, the pension benefit formula was to be computed at 40 percent of the final 24 months average salary. This was recommended to avoid sudden increase in benefit level since it is pegged to the last salary. However, while adopting the recommendations of the First Pay Commission, the Lhengye Zhungtshog had endorsed the pension benefit formula computed at 40 percent of final salary contrary to the 24 months average salary recommended by the Pay Commission. Therefore, in 2010, NPPF adopted the revised pension formula with benefit level fixed at 40 percent of final basic salary along with the increase of the contribution rate to 22 percent (employee 11 percent and employer 11


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percent) of basic salary after civil service pay revision of 2010.

11.2.2 Suspension of pension on re-employment

The Pension Plan was instituted in 2002 with the primary objective to provide income security after retirement. However, under the existing pension plan, pension benefits are paid even if members are gainfully employed. These re-employed officials not only receive pay, but also pension benefits and monthly contribution of 11 percent from the Government. Such a practice is not only against the principles of pension, but would also have adverse impact on the sustainability of the pension system calling for a huge subsidy from the Government to meet future pension obligations. Currently, there are 34 pensioners re-employed in various sectors of the civil and public services but the numbers are expected to increase over the years.

To rationalize the allocation of public resources and to reduce incidence of inter-generational burden as well as to avoid creation of moral hazard in the overall post-retirement system, the Commission recommends that pension for those re-employed in the civil and public service be immediately suspended.

11.2.3 national voluntary savings scheme

A National Savings Scheme (NSS) is proposed to be introduced to inculcate savings culture among the public servants. For participating in the scheme, the Commission recommends all public servants to voluntary contribute up to 5 percent of the basic salary for a minimum period of 5 years, which shall be tax exempted. The upper limit on the number of years that this scheme could be in place may be reviewed every 5 years. The NSS could be implemented by NPPF or any other financial institutions that offers high returns. Such an arrangement will provide predictable deposit base for the financial institutions to invest in long term projects besides helping the civil servants to save for the future. The scheme could be extended to the employees of the corporate and private sectors as well as to the public at large given the need to promote savings and investments.

11.2.4 Home Ownership Program for the members

As per the National Housing Policy, NHDC is mandated to provide affordable housing to the civil servants by increasing housing stock and promoting home ownership. The NPPF has also made significant moves towards achieving this mandate.

However, challenges in achieving this mandate include non-availability of land and lack of necessary infrastructure facilities such as access to the land, water and power supply. More importantly, lack of financing has been a major challenge. In this regard, the Commission recommends that the Government provide subsidies in the form of low interest rates on loans and allocation of government land free of cost to ‘society-type’ groupings of low income civil servants. The Commission also recommends that the government explore the opportunity for


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nPPF, nHDC and nlC to work together to increase supply of low income housing beginning with the areas where the shortage is most severe. For other groups, public-private partnership is recommended in increasing housing stock and to promote home ownership.

11.3 Gratuity

To recognize and reward civil servants for their long service to the country, civil servants are entitled to gratuity after a minimum of 10 years of service or upon death, except those on contract. The amount is computed based on last basic pay times the number of completed years in service, subject to a maximum of Nu. 900,000. This ceiling was last revised in 2009. Gratuity constitutes an important part of the pay, allowances and benefit packages for the public servants as it helps them make their transition out of the public service.

Given its importance, the Commission revisited the gratuity ceiling and reviewed its impact. The Commission finds that the current gratuity ceiling of Nu. 900,000 only affects people who serve more than 30 years and have reached the EX3 level and above. Therefore, if this is not revised following the revision in the pay, then it will also affect people down to the P2 level. For others, with consolidation of current lumpsum salary allowance at 15 percent on existing salary and 20 percent revision after consolidation, the gratuity of the employees within the maximum ceiling will increase by 38 percent. On the other hand, the Commission finds that the group of people who will be affected by this ceiling are a small number of people who make up the senior bureaucrats at EX/ES-2 level and above.

It is recommended that the maximum gratuity ceiling be enhanced to nu. 1.500 million. Further, unlike other post service benefits like pension, the Commission recommends that minimum vesting period of 10 years for gratuity be done away with so that people are entitled to it right after the completion of probation period. Further, it is recommended that the same ceiling be applied to all other public servants.

11.4 Early Retirement Scheme (ERS)

The Early Retirement Scheme was introduced in the early 2000s to compensate civil servants opting to retire before their superannuation age. Nevertheless, not many civil servants have availed this scheme as it was not considered very attractive, and opportunities outside of the civil service are also not very good.

Table 11.4: Existing ERS

Age Limit ERS Benefits

Age 51 years and above 3 months’ salary for every remaining year of service subject to maximum of 15 months’ salary

Age below 51 years

One months’ basic salary multiplied by the remaining years of service to superannuation subject to a maxi-mum of 12 months


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In order to provide fair compensation and to encourage voluntary retirement and to meet the intended objective of the Government, the Commission recommends to enhance the benefit levels of the ERS.

Table 11.5: Recommended ERS

Age Limit ERS Benefits

Age 51 years and above3 months’ salary for every remaining year of service subject to maximum of 18months’ salary

Age below 51 years2months’ basic salary multiplied by the remaining years of service to superannuation subject to a maximum of 18 months

11.5 Special Retirement Scheme (SRS)

To enhance efficiency and performance in the civil service, as provisioned in the BCSR 2012, periodic special retirement scheme (SRS) are to be implemented to right size and to address redundant employees. While implementing the scheme, there will be a cost for the government at the beginning, which gets compensated through financial savings in the long term.

To bring fair compensation for those identified by respective agencies and competent authorities for SRS, there is a need to be fairly paid for his/her services rendered and to be at least given a fair level of financial security after retirement.

The Commission recommends implementation of SRS to right size the civil service from time to time for which specific schemes would have to be considered based on why the SRS was necessary at that period of time.

11.6 Group Insurance Scheme (GIS)

The Group Insurance Scheme was introduced in 1987 by the Royal Insurance Corporation Limited (RICB) for civil servants, and employees of autonomous and corporate bodies. The Group Saving Cum Insurance is a low cost contributory and self-financing scheme giving twin benefits: (i) an insurance cover to help their families in the event of death or permanent total disablement while in service; and (ii) a lumpsum payment of the accumulated savings with interest to the employee or to their families on cessation of employment on account of retirement, resignation, death or permanent total disablement. The existing grouping of members for subscription rate and insurance coverage is based on employees’ position level.


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Table 11.6: Existing GIS

Group Position level Subscription Rate/Month Insurance Coverage

Group- A EX/ES 1 to 3 300 300,000

Group- B P1 to P5 200 200,000

Group-C S1 and below 100 100,000

Apart from insurance, the 60 percent of the contribution is directly credited to saving fund and accumulated saving is paid at the time of superannuation or cessation of service with an interest of 7.5 per annum. Excluding the insurance, the average payment is about 65 percent of the total contribution. Despite the numerous revisions of salary of the public servants, the scheme has not been revised since the introduction.

The scheme has benefited employees both in terms of insurance during the accident and savings at time of retirement. Given the low level of contribution, the accumulation of savings and insurance benefits are also minimal. Moreover, the subscription rate, which was 3-9 percent of monthly pay scale of 1987, and currently works out to less than 1-2 percent of the 2010 pay scale.

Since the present level of contribution for insurance and saving has been in place for over 27 years, it is recommended that the new grouping for civil servants be proposed as per the position classification and the level of contribution increased by 67 percent at EX/ES level and 100-200 percent at P1-O4. This constitutes about 1-2 percent of the new pay scale.

Table 11.7: Recommended GIS

Group Position level Subscription Rate/Month Insurance Coverage

Group- A EX/ES 1 to 3 500 500,000

Group- B P1 to P5 400 400,000

Group- C S1 and S5 300 300,000

Group- D O1 to O4 200 200,000

The insurance companies have agreed to the increased insurance coverage with the increased premium and also adding a group to include O-level under the PCS of RCSC.

The new subscription and insurance coverage is recommended for all civil and public servants for which the details would have to be worked out with the insurance providers.


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12 IMPLICATION ON CORPORATE AND OTHER SECTORS

12.1 Background

The remuneration package of the corporate sector is generally segregated into a) pay scale and levels; b) allowances and other service benefits; and c) performance based incentives.

In general, the pay scales of the regular corporate employees are about 15 percent higher than that of civil service. However, based on the size of the corporation and its profitability, the allowances tend to vary across corporations. The corporations are categorized into three groups – small, medium and large – and top positions of the corporate are equated to positions above P1 level in the civil service.

12.2 SOEs under Ministry of Finance (MoF)

The corporate salary structures evolved from the civil service salary structures with additional corporate allowances. The corporate allowances for SOEs under MoF such as BDBL, Bhutan Post, BBS, Kuensel, FCB, and BAIL have been revised to 20 percent of the basic pay. Further, depending on the company’s performance, annual bonuses are also paid. Most of the SOEs under the MoF are commercially not viable but exist in order to fulfill specific social objectives. Therefore, some of these companies still continue to receive financial support from the Government. The salary structure of SOEs under MoF is given at Annexure 12.

Except for officers at Grade 1 for BDBL and NPPF, all the SOEs under MoF have the same pay scales. The pay scales and allowances of the CEOs/MDs however vary from company to company as placed at Annexure 13.

12.3 Druk Holding & Investments (DHI)

DHI has its own pay scales based on the contractual nature of the appointment of its employees. DHI’s salary and allowances structure has three levels: professional/corporate, operational, and wage services as placed at Annexure 14. The compression ratio between the Director and Driver is about 6.4 excluding the allowances. The wage service employees such as the messenger, security guard and sweeper are paid Nu. 180 per day, which is above the national minimum wage.

Although employees are recruited on contract basis for an initial period of three years, the pay scales have provisioned annual increments of 5 percent over a 20-year period. The higher pay scales than most of the other corporate bodies in Bhutan adopted by DHI are most probably due to the short contract tenures of three years and the high competition in the market for similar expertise.

The DHI Remuneration Guidelines that forms part of the Royal Charter that created DHI empowers the DHI Board to determine the remuneration of the CEO and employees of DHI.

12 IMPLICATION ON CORPORATE AND OTHER SECTORS


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12.4 DHI Owned Companies (DOCs)

When the first corporations were curved out of the civil service such as the Chhukha Hydro Power Corporation Ltd, the Government then had agreed that corporate salary structures be kept at about 45 percent above that of the civil service, and those delinked from the civil service would be entitled to other benefits such as bonuses. The pay scale differentials slowly dwindled to 30 percent and today the differentials are down to about 15 percent. Apart from the regular salaries, corporations are entitled to other benefits such as bonuses although such benefits are now tied to performance for which targets are agreed upfront at the beginning of the year.

The compression ratio for the DOCs between level 1 (highest regular) and lowest level is 6.4 without considering the allowances. The higher salary structure of DHI has not cascaded down to the DOCs. The salary structures of the DOCs is given at Annexure 15.

The CEOs/MDs are selected through open selection processes. The terms and conditions of the appointment of CEOs/MDs differ based on the terms of reference of appointment and the tenures. CEOs/MDs are generally being appointed on contract for periods of 3-5 years. The basic salary scales of the CEOs/MDs of DOCs and the CEO and Chairperson of DHI is placed at Annexure 16.

12.5 Spiraling Effect of Public Service Salary Revision on Corporate Sector

12.5.1 Effect on SOEs under MoF

The total pay and allowances of Nu. 478.530 million for the SOEs constitutes about 16 percent of their gross revenues. Considering the pay and allowances of SOEs are kept at 15 percent higher than the civil servants, the proposed increase of civil servants’ pay and allowances will translate into about 15 percent rise in corporate pay and allowances, which is estimated at Nu. 71.78 million.

Considering their performance and expenditure growth in past five years, the gross revenue of SOEs will be sufficient to meet the 15 percent increase in their pay and allowances except for the Wood Craft Center, Bhutan Post and BBSC. The SOEs under MoF will have to meet any salary revisions through gains in efficiency and reduction in other operating costs as the Government may not provide any funds for meeting the salary revision cost.

Table 12.1: Spiraling Effect on SOEs (Nu. in millions)

# SOEsGross

Turnover

Expenditure

PBT CIT PATDiv. to

Govt.

Rev. to

Govt.

Subsidy

Other Expdn

Pay & Allc.

TravelCash/

In -kind

Tax Ex-emp-tion

Total

1Baseline 2012

2,915.39 2,558.35 478.53 46.54 357.04 35.58 321.47 8.25 43.83 12.71 71.59 84.30

2Proj.2013

3,433.62 3,057.64 550.31 53.05 375.97 38.46 351.70 14.80 53.25 6.36 95.36 101.72

Differ-ence

518.22 499.29 71.78 6.51 18.93 2.88 30.24 6.55 9.43 6.35 (23.77) (17.42)


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12.5.2 Effect on DHI and DOCs

With the revision of civil servants pay and allowances, it is possible that employees of DHI and DOCs will also demand similar wage increases. Considering the five years average performance and expenditure trends of DHI and the seven DOCs, the gross turnover is sufficient to meet the likely increase in pay and allowances of DHI and the seven DOCs. The revision is estimated to cost Nu. 281.21 million.

Since the dividend from DHI is negotiated and agreed, it is not likely to have a major impact on the dividend payments to the Government. As regards to the corporate income tax from the DOCs, past performance trends indicate that the annual growth will be able to absorb the additional expenditure on pay and allowances due to salary revision, Hence, CIT may not decline.

Table 12.2: Spiraling Effect on DOCs

#De-scrip-tion

Gross Revenue/ Turnover

ExpenditurePBT CIT PAT

Divi-dend Govt.

Revenue to Govt.Other

Expd.Pay & Allc.

Travel

1Base-line-

201227,545.61 13,640.07 1,874.74 140.44 13,905.54 4,183.38 9,722.15 7,559.08 11,742.46

2Proj.2013

34,835.47 18,012.68 2,155.95 159.34 16,822.79 5,046.84 11,913.87 9,173.16 14,220.00

Differ-ence

7,289.86 4,372.60 281.21 18.89 2,917.26 863.45 2,191.72 1,614.09 2,477.54

12.6 Royal Monetary Authority of Bhutan (RMA)

As per the RMA Act, the pay and allowances of Governor and Deputy Governors are approved by the Government and the pay & allowances of RMA’s employees are approved by the Board. With regard to pay scales, there are four levels of category; viz. a) officers, b) administrative staff, c) administrative support staff and d) general support staff.

The salary structure of RMA is as given in the Annexure 17.

The Commission noted the existing pay and allowances of the Governor and Deputy Governors of RMA. The Commission recommended that any revisions of the existing pay and allowances of these positions hereafter may be done in line with pay structures for the Heads and Members of the Constitutional bodies.

12.7 Financial overview of the Corporate Sector

In 2012, the total revenue of SOEs increased to Nu. 39.812 billion from Nu. 37.044 billion in 2011 representing an increase of 7.5 percent. DGPC earned about Nu. 11.140 billion representing 28 percent of the total earnings. The overall profit before tax increased by 6.8 percent and the revenue to the Government in the form of tax and dividend also increased by


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6 percent from Nu. 7.647 billion in 2011 to Nu. 8.107 billion in 2012.

Although the total revenue to government increased, the average return on equity has decreased due to corporatization of companies with low profitability such as CDCL, NHDC and infusion of capital in DCCL, DPL and BDBL.

Table 12.3: Overall financial overview

Financial FactsNu. in millions

2012 2011 2010

Gross turnover 39,812.72 37,044.40 35,129.45

Profit before tax 16,738.62 15,667.00 15,966.23

Total net worth 80,019.57 70,819.28 64,646.61

Total asset 178,056.86 163,851.51 163,757.93

Govt.’s share of net worth in the com-panies

71,763.79 64,672.86 60,661.02

Average return on equity 8% 13% 15%

Total Revenue to the Government 8,107.30 7,647.40 7,806.60

Source: PED, MoF

Of the total revenues, Nu. 362.82 million was provided to SOEs in the form of subsidies and grants representing about 4.5 percent of total revenues. The BBSC received the highest subsidy of Nu. 146.504 million followed by Drukair Corporation with Nu. 132.68 million and Nu. 71.592 million for BDBL in the form of corporate tax exemption. The Government thus far provided Nu. 1.059 billion as interest subsidy for the purchase of aircraft in 2004 and the proposal is to provide similar financial support for the purchase of new aircraft in FY 2014-15. Now with the private airlines operating in the country, the extension of such facilities to Drukair should be reviewed to promote fair competition in the market.

12.8 Private Sector

Though private sector has grown rapidly over the years, the employees’ remuneration is still below the average civil and corporate employees. The compression ratio is highest in the private sector due to huge gap between salary of management and support level. Moreover, unlike in civil service and corporate bodies, the private employees in general do not have post service benefits such as pension and gratuity.

In the private sector, the top management is paid generously whereas the lower level staffs are paid much lower than those in the similar position of the civil service. With revision of public service’s pay and allowances, it is likely that the private sector’s pay and allowances will also undergo some upward revision. This may have an impact on those private companies who cannot afford the revision.


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While wage raise could motivate better performance of the employees and therefore the productivity of the company, the likely impact on profitability due to rise in salary and wage bill could not be ascertained.

The Commission recommends that the Economic Stimulus Plan (ESP) be well targeted and provided to the private sector in order to foster growth and employment in the country.


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13 IMPACT OF SALARY REVISION

13.1 Annual Financial Implication

The gross financial implication of the recommended revision of the pay and allowances of public servants is estimated at Nu. 2.441 billion per annum. This includes Nu. 1.839 billion for salary, Nu. 367.895 million for allowances and Nu. 235.464 million for PF and gratuity. The net implication of the consolidation of existing lumpsum salary allowance is Nu. 300 million. The monetization of the duty free vehicle quota and withdrawal of designated vehicles will have additional financial implication but it’s expected to be financed through increase in motor vehicle tax revenues.

Table 13.1: Financial Implication of pay & allowances (Nu. in millions)

SI. No

DescriptionExisting

2010 Pay Scale

Lump sum Salary Merger

20% Revision

after Merger

Implication from Revi-

sion

I Salary 4,855 5,497 6,694 1,839

II Lump Sum Salary Allowance 643 - - -

III Allowances 969 1,165 1,243 273

1 Housing 30 33 34 4.7

2 Leave Encashment (LE) 275 305 372 97.4

3 Professional - Teaching 309 356 356 46.4

4 Professional - Medical 85 97 97 12.7

5 Professional - Audit (20%) 8 9 9 1.2

6Professional - ACC Investigator (45%)

3 4 4 0.5

7 Professional - ACC (20%) 1 1 1 0.1

8 Difficulty Area 95 189 189 94.7

9 High Altitude 3 5 5 2.3

10 Radiation 0 1 1 0.4

11 Uniform 2 5 5 2.4

12 Communication 6 6 6 -

13 Cash Handling 4 4 4 -

14 Professional - DCA 0 1 1 1

15 Driver & Vehicle Maintenance 9 9 9 -

13 IMPACT OF SALARY REVISION


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SI. No

DescriptionExisting

2010 Pay Scale

Lump sum Salary Merger

20% Revision

after Merger

Implication from Revi-

sion

16 DT Chairperson 2 2 2 -

17 Dy. DT Chairperson 1 1 1 -

18 Provision for Pay Fixation - 10 10.0

19 Foreign Service 126 126 126 -

20 Discretionary Grant 10 10 10 -

IV Leave Travel Concession(LTC) 360 378 453 93

V Post Service Benefit (PSB) 658 744 893 235

1 Provident Fund (PF) 481 541 650 168

2 Retirement Benefits 176 203 243 67

VI Total 7,484 7,784 9,283 2,441

13.2 Financing Pay and Allowance Revision

The revision of the pay and allowances shall be financed from the fiscal space created through expenditure rationalization and revenue enhancement measures.

Table 13.2: Financing Pay and Allowance Revision (Nu. in millions)

Sl. No.

Sources2014/15 2015/16 2016/17 2017/18 11th

FYPEst. Proj. Proj. Proj.

A Additional recurrent expenditure 2,999 2,281 2,325 2,370 9,974

B Additional Revenue 1,282 554 555 557 2,9481 Chhukha Power Tariff Revision 830 380 380 380 1,970

2Additional PIT revenue from salary revision

76 78 79 81 314

3 Tax Revenue from Vehicle Quota 376 96 96 96 664

C Expenditure Savings 700 728 757 787 2,972

1Containing Civil Servant Growth at 2% p.a.

184 187 191 195 757

2Capping in-country travel at 15% of the Wage Bill

107 107 107 107 428

3Savings from Pool Vehicle Recur-rent Cost

409 409 409 409 1,636

4Converting Salary based allowance to lumpsum allowance

0 25 50 76 151


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D Provision for salary consolidation 1,279 1,279 1,279 1,279 5,116

E Fiscal space (B+C+D) 3,261 2,561 2,591 2,623 11,036

F Balance (E-A) 262 280 266 253 1,062

The recommended revision of pay and allowances is fully financed within the fiscal space. A surplus of Nu. 1.062 billion is projected in the fiscal space. However, the realization of the fiscal space will depend on full implementation of the recommendations of the Commission.

13.3 Fiscal Projection after Revisions

With the pay and allowance revision, the current expenditure for the 11th FYP period has been projected at Nu. 119.846 billion, which is 7 percent lower than the original figure of Nu. 129.078 billion. Since the original projected current expenditure was higher, the fiscal deficit is expected to improve to 0.04 percent of GDP as against the projected of 1.0 percent.

The average coverage of domestic revenue to current expenditure is projected at an average of 118 percent and surplus revenue will be sufficient to cover on an average of 25 percent of capital expenditure.

Table 13.3: Fiscal projection after revision

Description2013/14 2014/15 2015/16 2016/17 2017/18 11th FYP

Budget Proj. Proj. Proj. Proj.

Revenue & Grants 29,828 38,677 40,667 42,665 54,715 206,552Domestic Revenue 21,981 25,041 26,308 28,803 40,090 142,223

Tax 15,474 17,853 19,344 21,699 28,203 102,573

Non-tax 6,507 7,188 6,965 7,104 11,887 39,650

Grants 7,835 13,636 14,359 13,862 14,625 64,317

Outlay 35,421 38,982 41,978 42,289 43,150 201,820Total Expenditure 37,319 40,922 44,059 44,304 45,243 211,846

Current 19,104 23,156 23,931 25,697 27,958 119,846

Capital 18,215 17,766 20,128 18,606 17,285 92,000

Net Lending -1,898 -1,939 -2,081 -2,015 -2,093 -10,026

Fiscal Balance -5,593 -305 -1,311 376 11,565 4,732

Net Borrowings -92 3,459 -331 39 2 3,078Borrowings 2,667 6,364 2,916 3,027 3,167 18,141

Repayments 2,758 2,905 3,247 2,988 3,165 15,063

Resource Gap -5,684 3,154 -1,641 415 11,567 7,810

In percent of GDP

Revenue & Grants 25.2 29.2 27.8 26.3 25.7 26.8Domestic Revenue 18.6 18.9 18.0 17.7 18.9 18.4

Grants 6.6 10.3 9.8 8.5 6.9 8.4


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Outlay 29.9 29.5 28.7 26.0 20.3 26.9Total Expenditure 31.5 30.9 30.1 27.3 21.3 28.2

Current 16.1 17.5 16.4 15.8 13.1 15.8

Capital 15.4 13.4 13.8 11.5 8.1 12.4

Fiscal Balance -4.7 -0.2 -0.9 0.2 5.4 -0.04

Net Borrowings -0.1 2.6 -0.2 0.0 0.0 0.5

Resource Gap -4.8 2.4 -1.1 0.3 5.4 0.4

Coverage by Domestic Revenue (DR)

Current Expenditure by DR

115% 108% 110% 112% 143% 118%

Capital Expenditure by Revenue Surplus

16% 11% 12% 17% 70% 25%

Total Expenditure by DR

59% 61% 60% 65% 89% 67%

13.3.1 Domestic revenue

Even with a modest revenue projection, the coverage of current expenditure by domestic revenue is projected at an average of 118 percent in the 11th FYP fulfilling the Constitutional requirement. This coverage has improved significantly by about 5 percent. The revenue balance will improve from Nu. 14.018 billion to Nu. 22.377 billion without accounting for increased PIT from salary revision, expected increase in vehicle import tax, and other onetime revenue receipts such as proceeds from auctioning of old pool vehicles.

13.3.2 Current Expenditure

Pay and allowances as a percent of current expenditure is about 44 percent after revision as compared to existing 43 percent. Maintaining this percentage hinges on containing the civil servants’ growth to 2 percent per annum and capping in-country travel budget at 15 percent of total pay and allowance budget.

13.3.3 Public debt

The external debt has been growing steadily over the past decade. As per the IMF Article IV Consultation Mission of March, 2014, Bhutan is categorized under moderate risk of debt distress as the policy related to LIC-DSA thresholds for external debt have been breached for several debt indicators and is projected to continue as more hydropower projects which require huge investments will be initiated in the medium term. Since the pay revision will be fully financed through the fiscal space, there will be no impact on public debt.


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13.3.4 Inflation

In general, substantial revision of pay and allowances of a large number of employees is normally accompanied by rise in price of local consumer goods, imported goods, services and rents. In order to protect inflationary pressures, relevant agencies should intervene through appropriate measures and instruments. For example, RMA should track inflation and agencies such as Ministry of Agriculture and Forests make necessary logistic arrangement to ensure continuous supply of local produce (vegetable, fruits, rice, etc.) in the market at affordable prices.

13.3.5 Other Fiscal & Economic Projections

The economic projections following the pay revision remain the same as projected for the 11th

FYP. This is mainly due to the fact that provisions for pay revision were already included in the 11th FYP when making its projections. Moreover, the Commission made extensive efforts to ensure that the pay revision is accompanied by a number of fiscal measures that will help to ensure that there is no further fiscal deterioration on account of the pay revision.

The IMF Article IV Consultations Mission in March, 2014 made the observation in its concluding statement that “any civil service wage hike should be accompanied by complementary revenue measures, otherwise they would lead to further deterioration of fiscal balances and a resurgence of overheating pressures.” The Commission is confident that even after implementing the proposed pay revision, any negative impact on our economic prospects arising directly from it will be minimal, as revenue measures as well as expenditure control measures were considered.

Going forward, the Mission’s assessment on economic outlook and risks in the near and medium term is in line with 11th FYP projections. The growth momentum is expected to pick up as activities in the hydropower and its related activities recover and the Government’s efforts to enhance investments and private sector development start to materialize. Inflation is expected to be largely influenced by price developments in India and the fiscal measures recommended to calm consumption overall, should also minimize the effects of additional disposable income following the pay revision.

Notwithstanding the above, the Commission would like to underline the challenges for macroeconomic management in the 11th FYP, which will be critical to achieving the 11th FYP goals and objectives. In particular, external financing should be monitored closely given the pressures on the overall balance of payments position that is projected in the 11th FYP. There will also be a need to better manage the financial sector to avoid the problems associated with rapid credit growth, including pressures on the INR reserves. At the same time, it will be critical to ensure that investments, public and private are implemented in time and within estimated cost, particularly the hydropower projects. It is the Commission’s hope that the positive impact of the revised Pay, Allowances and Benefits on the public servants performance will far outweigh associated costs and help public servants rise to these challenges and overcome it.


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14 IMPLEMENTATION OF NEw PAY STRUCTURE

The Second Pay Commission, in adherence to its mandates and keeping in mind the relevant Articles of the Constitution and provisions of the BCSR 2012, reviewed the existing pay and allowances to recommend a holistic pay and allowances in relation to the roles and responsibilities entrusted on the civil and public services, and at the various position levels. The recommended pay and allowances reflect the increased cost of living due to inflation and other economic and social factors.

The Commission has tried to minimize the impact of the pay revision and to make it affordable to the Government, and took into consideration the sustainability of the Pension Fund. Affordability and long term financial sustainability for the government was a major concern for the Commission, and the Commission recommends that the Government consider the proposals for tax measures and expenditure rationalization to meet the deficit until Bhutan attains the national goal of self-reliance.

The Commission recommends implementation of the pay revision as below:

new Scale: Merge existing lumpsum salary allowance, cap all percentage based allowances to the merged salary except housing allowance, and provide a 20 percent revision on the merged amount and adopt the new scale starting FY 2014-15. where there is no existing lumpsum salary allowance, new scales to be fixed as recommended in the various sections of the recommendations.

The Commission recommends salary revision on the merger and adoption of new pay scales as appended at annexure 3.

Pay Fixation

On approval of the recommendations by the Government, the Ministry of Finance shall issue guidelines for fixation of pay as per norms.

Effective Date

The Commission recommends that the proposal as submitted be implemented from 1st July, 2014.

14 IMPLEMENTATION OF NEw PAY STRUCTURE


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15 GENERAL RECOMMENDATIONS

15.1 Recommended Fiscal Measures

15.1.1 Revenue Enhancement Measures

1. Fiscal Incentives: For systematic review of the cost-effectiveness of tax concessions granted in the past, an accurate accounting is required for the revenue foregone on each major tax-reducing concession targeting specific sectors or economic agent.

� A moratorium on new concessions should be considered as a first step.

� Based on the outcome, specific recommendations could be proposed to enhance domestic revenue in the medium to long term period.

2. Capital gains tax: Explore the possibility of introducing capital gains tax or inheritance tax under direct tax revenue.

3. Royalty: Review the existing rates on royalty on state resources.

4. Refine the classification and rates of sales tax and customs duty: Existing system has eight different rates for different commodities, which makes the implementation and enforcement of duties and taxes difficult to collect and monitor. Moreover, importers maneuvers with the rates to avoid tax and duties. This would ease tax administration and give rise to opportunities for increased tax collection.

5. The domestic revenue forecast includes the Excise Duty Refund (EDR) from India. Tax refunds from India should be pursued to ensure projected revenues.

15.1.2 Measures on Expenditure Rationalization

1. Rationalize expenditure on conspicuous consumption of the government agencies.

2. Strengthen monitoring and evaluation mechanism in Department of National Budget.

3. Institute result oriented or output base budgeting method.

4. In order to rationalize the purchase of computers, a lumpsum amount can be provided to civil servants for the purchase of computers which they can own after certain period of time. They can add on to this lumpsum amount to purchase the computer of their choice.

5. Rationalize the subsidies provided to the SOEs and autonomous agencies like RUB, Thromdes, and others. The subsidies should be time bound and targeted.

15 GENERAL RECOMMENDATIONS


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6. Government offices occupancy in the private buildings should be time bound and based on open market rates as housing supply has increased as compared to the past.

15.2 Cost of Living Adjustment (COLA)

Cost of living adjustment (COLA) is a mechanism for protection of income erosion against inflation. It is commonly used for Social Security retirement benefit. A COLA means that your monthly income is indexed to inflation. The added benefit of such indexation is that periodic adjustments to pay for inflation is not required as pay is automatically protected through its linkage to inflation. Also, where people make contributions to defined benefit pension schemes from their pay (along with contributions from employers), this system ensures that build-up of pension contribution and pension payout is smoother and more closely linked than pay adjustments which result in higher pay revisions.

The First Pay Commission recommended indexation of salary to annual CPI but with a threshold of 7 percent or whichever is lower. Assuming the continuation of same level of average inflation as in the 10th FYP, the average inflation since 1988 was 7.7 percent per annum. Should the cost of living adjustment method of income protection be followed as recommended by the First Pay Commission, all civil servants salary income would be more than adequately protected. The required total individual income protection against inflation is 20.1 percent (since the last pay revision in 2011) and the COLA will be around 25.3 percent without considering the 2 percent annual salary increment.

While it is good to protect the income of the public servants through such mechanism, on the negative side it can put pressure on the exchequer during economic downturns when revenues fall but inflation could still be high.

As a result, governments in other countries have used innovative ways. For example in Singapore, civil servants are provided bonuses based on a) Real Median Income Growth Rate b) Real Income Growth Rate of the Lowest 20th Percentile Income, c) Unemployment Rate, d) Real GDP Growth Rate. Basically such a system ties award of bonus to civil service to the performance of the economy, implying that they are largely responsible for what happens to the economy, which should be the case.

Such a system is difficult to adopt for Bhutan at the present juncture in view of the narrow tax base and current economic situation. However, as Bhutan heads toward self-reliance and with expectations of domestic revenues being in excess of expenditures at one time or the other, adoption of COLA as implemented in Singapore might be an important tool to ensure that the pay and allowances of civil and public servants are adjusted accordingly to how the economy moves.

The Commission recommends that the government continue to track COLA and other related parameters for incorporation by future Pay Commissions.


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15.3 Performance Based Incentives

The civil and public services must endeavor to create a “culture based on principles of meritocracy, excellence and hard work”. Performance based incentives could be the fastest way to get there.

A major goal of any compensation programme should be to motivate employees to perform their best. Performance should be the standard by which employees move upward within the pay grade for the job. In most variable pay plans performance is a factor that leads to an addition to basic pay.

The idea of relating pay to performance is highly attractive and incentivizes higher productivity. Most employees agree that there is a need to make distinction and institute reward system between the performers and non-performers contrary to the current indiscriminate treatment. However, the success of any performance-based reward scheme will depend very much on a credible supporting performance management framework that is fair and consistently applied. This is currently missing. Also, adequate funding is essential to allow meaningful rewards to be provided as a means to motivate staff.

At the same time, it is also important to recognize that such systems have downsides such as creating unhealthy rivalry in the workplace, and breeding a culture of flattery. However, a number of public sector corporations have already started such performance based incentive schemes with varying degrees of success. The introduction of the system has brought about remarkable changes in the work places and brought about efficiencies in the delivery of their services.

Taking the success stories as a cue, the Commission would like to recommend that the government implement the Government Performance Management System at the earliest.

15.4 Independence of Constitutional Bodies from RCSC

During the consultations on the difficulties faced by the civil and public services in delivering their mandates, other than the need to revise pay and allowances, an issue that kept surfacing was the delinking of the constitutional bodies from the civil service. Many of the constitutional bodies expressed that they were handicapped in delivering on the services as they had no control over the very people that were supposed to be implementing their mandates. The RCSC is the parent body for the civil servants deputed and/or posted to these constitutional bodies and decides on promotions, trainings, and postings of those civil servants. The constitutional bodies opined that they needed to be insulated from interference, political or otherwise, for them to deliver their services fairly and effectively.

15.5 Other General Recommendations

1. Implement Thromde Finance Policy for financial sustainability

2. Implement Consumer Protection Act and Tenancy Act


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3. Introduce non-monetary benefits/allowances for government employees with disabilities

� enhanced number of days for casual leave

� special aids and appliances for facilitating office work

� liberal flexi hours

� better access to work places

� extra allowances for parents having disabled children

4. Some of the salary revision recommendations are in contravention to the provisions of some of the existing Acts, Rules and Regulation. As the recommendations in respect of pay and allowances are mandated to the Pay Commission by the Constitution, the relevant provisions of the following Acts, Rules and Regulation may need to be reviewed:

i) Judicial Services Act, 2007

ii) Parliamentary Entitlement Act, 2008

iii) Parliamentary Entitlement Rules and Regulation, 2009

iv) Bhutan Civil Service Act, 2010

v) Bhutan Civil Service Rules and Regulation, 2012

vi) Foreign Service Entitlement Rules and Regulations, 2002

vii) Labour and Employment Act, 2007

viii) Entitlement and Service Conditions Act for the Holders, Members and Commissioner of Constitutional Office, 2010


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16 ACKNOwLEDGEMENT

The Commission would like to express our sincere gratitude to the Government for the trust and confidence placed upon the team. Despite various constraints and challenges faced in formulating Pay Policy, collection, compilation and analysis of data, the Commission made all efforts to leave no stone unturned.

The Commission’s deliberations and discussions were aimed at drawing up appropriate recommendations in keeping with the given mandate. The Commission would like to thank all the stakeholders for the valuable feedback provided during the course of its assignment.

16 ACKNOwLEDGEMENT


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17 ANNEXURES

Annexure 1: Executive Order

17 ANNEXURES


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Annexure 2: List of Agencies Consulted

A The Chairman’s meetings1 Lyonpo Jigme Zangpo, Speaker, National Assembly

2 Lyonpo Thinley Gyamtsho, Chairperson, RCSC

3 Dasho Sonam Tshering, Secretary, MoEA and Chairman, First Pay Commission

4 Dasho Pema Thinley, Vice Chancellor, RUB

5 Dasho Ugyen Chewang, Auditor General, RAA

6 Dasho Neten Zangmo, Chairperson, ACC

7 Dasho Tshering Wangchuk, Supreme Court Judge

B Representation by Agencies

I Center for Bhutan Studies and GNH1 Dasho Karma Ura, President

II Ministry of Education1 Aum Sangay Zam, Secretary

2 Tshewang Tandin, DG

3 Kinley Gyeltshen, CHRO

4 Dhendup Tshering, Sr. HRO

III Ministry of Health1 Dr. Ugyen Dophu, DG

2 Khampa, DCHRO

3 Tandin, Nursing Superintendent

4 Tshering Dema, Budget Officer

IV Ministry of Foreign Affairs1 Dasho Yeshey Dorji, Foreign Secretary

2 Sonam Tobden Rabgay, Director General, PPD

3 Tsewang C. Dorji, Chief, SAARC Division

4 Passang Wangdi, Chief Adm. Officer

5 Yeshi Xangmo, Accounts Officer

V Royal Audit Authority1 Jamtsho, Dy. Auditor General

2 Dechen Pelden, Asst. Auditor General

3 Gatu Drukpa, Chief Audit Officer

4 Sangay Tenzin, Asst. Programme Officer

VI Department of Local Governance, MoHCA1 Dorji Norbu, Director General

2 Rinzin Penjor, Chief Programme Officer

3 Tseten Dorji, Sr. Programme Officer


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4 Wangdi Gyeltshen, Sr. Programme Officer

VII NPPF1 Sonam Yeshey, Provident & Pension Head

2 Tshering Yangzom, Analyst

VIII MoF

1 Thinley Yangdon, Sr. Planning Officer

Annexure 3: Recommended Pay Scale of Civil and Public Servants

Position Level Pay Scale 2014Increase from

2010 ScaleIncrease After

Merger

Min. Incr. Max. Amount Percent AmountPer-cent

Prime Minister & Cabinet Ministers

Prime Minister 150,000 3,000 165,000 72,000 92% 72,000 92%

Cabinet Ministers 120,000 2,400 132,000 42,000 54% 42,000 54%

Members of Parlia-ment

Speaker of NA 132,000 2,640 145,200 54,000 69% 54,000 69%

Chairperson of NC 120,000 2,400 132,000 42,000 54% 42,000 54%

Opposition Leader 120,000 2,400 132,000 42,000 54% 42,000 54%

Dy. Speaker of NA 75,600 1,510 83,150 12,600 20% 12,600 20%

Dy. Chairperson of NC

75,600 1,510 83,150 12,600 20% 12,600 20%

Members 66,600 1,330 73,250 16,155 32% 11,110 20%

Judiciary

Chief Justice of Su-preme Court

132,000 2,640 145,200 54,000 69% 54,000 69%

Drangpons of SC 75,600 1,510 83,150 12,600 20% 12,600 20%

Chief Justice of HC 66,600 1,330 73,250 3,600 6% 3,600 6%

Drangpons of High Court

63,200 1,265 69,525 12,755 25% 7,710 14%

Privy Council

Chairman 120,000 2,400 132,000 42,000 54% 42,000 54%

Council Members 63,200 1,265 69,525 12,755 25% 12,755 25%

Constitutional Bodies


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Merger


Chairperson, RCSC 81,900 1,640 90,100 18,900 30% 18,900 30%

Chairperson, ACC 81,900 1,640 90,100 18,900 30% 18,900 30%

Chief Election Com-missioner, ECB

81,900 1,640 90,100 18,900 30% 18,900 30%

Auditor General 81,900 1,640 90,100 18,900 30% 18,900 30%

Commissioners, RCSC

63,200 1,265 69,525 12,755 25% 12,755 25%

Commissioners, ACC

63,200 1,265 69,525 12,755 25% 12,755 25%

Commissioners, ECB

63,200 1,265 69,525 12,755 25% 12,755 25%

Office of Attorney General

Attorney General 75,600 1,510 83,150 12,600 20% 12,600 20%

Local Government

Thrompons 53,000 1,060 58,300 14,525 38% 8,825 20%

Gups 20,000 5,645 39% 5,645 39%

Mangmi 15,000 4,235 39% 4,235 39%

Geydrungs 13,000 3,430 36% 3,430 36%

Chiwog Tshogpas 7,000 2,000 40% 2,000 40%

Dzongkhag Throm Tshogpa

7,000 2,000 40% 2,000 40%

Thromdey Tshogpa 7,000 2,000 40% 2,000 40%

Civil Servants

Cabinet Secretary 75,600 1,510 90,700 12,600 20% 12,600 20%

Government Secre-taries

66,600 1,330 79,900 16,155 32% 11,110 20%

EX/ES-1 63,200 1,265 69,525 17,340 38% 10,546 20%

EX/ES-2 53,000 1,060 68,900 14,525 38% 8,825 20%

EX/ES-3 44,800 895 58,225 12,278 38% 7,460 20%

P1 35,300 705 45,875 9,690 38% 5,896 20%

P2 31,200 625 40,575 8,580 38% 5,229 20%

P3 27,300 545 35,475 7,470 38% 4,532 20%

P4 24,300 485 31,575 6,640 38% 4,024 20%


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Merger


P5 19,900 400 25,900 5,440 38% 3,298 20%

S1 18,300 365 23,775 4,995 38% 3,024 20%

S2 16,600 330 21,550 4,545 38% 2,759 20%

S3 15,200 305 19,775 4,185 38% 2,553 20%

S4 13,500 270 17,550 3,725 38% 2,277 20%

S5 12,500 250 16,250 3,455 38% 2,115 20%

O1 11,800 235 15,325 3,220 38% 1,949 20%

O2 11,100 220 14,400 3,040 38% 1,846 20%

O3 10,100 200 13,100 2,775 38% 1,690 20%

O4 9,400 190 12,250 2,595 38% 1,587 20%

GSP

GSP* 9,000 2,690 38% 1,477 20%

Para Regular

P3 27,300 545 35,475 7,470 38% 4,530 20%

P5 19,900 400 25,900 5,440 38% 3,298 20%

S1 18,300 365 23,775 4,995 38% 3,024 20%

S2 16,600 330 21,550 4,545 38% 2,759 20%

S3 15,200 305 19,775 4,185 38% 2,553 20%

S4 13,500 270 17,550 3,725 38% 2,277 20%

S5 12,500 250 16,250 3,455 38% 2,115 20%

O1 11,800 235 15,325 3,220 38% 1,949 20%

O2 11,100 220 14,400 3,040 38% 1,846 20%

O3 10,100 200 13,100 2,775 38% 1,690 20%

RAPA

Level S4 13,500 270 17,550 3,620 37% 3,620 37%

Level O1 11,800 235 15,325 3,180 37% 3,180 37%

Level O3 10,100 200 13,100 2,740 37% 2,740 37%

Others

ESP 7,000 2,000 40% 2,000 40%

NFE Instructors 8,400 2,400 40% 2,400 40%

Consolidated con-tract

14,000 4,000 40% 4,000 40%

*GSP I & II are Consolidated


102 of 115

Annexure 4: High Altitude Places above 12000 Feet

Sl.No. Village Dzongkhag

1 Tshozhong Gasa

2 Lunana Gasa

3 Hedi Gasa

4 Laya Gasa

5 Gangyul Thimphu

6 Lingshi Thimphu

7 Soi Thimphu

8 Barshong Thimphu

Annexure 5: High Altitude Places between 10,000 feet and 12,000 feet

Sl.No. Village Name Dzongkhag1 Gogonang Wangdue Phodrang

2 Phobjikha Wangdue Phodrang

3 Longtoe Wangdue Phodrang

4 Shingkhar Bumthang

5 Shingnyer Bumthang

6 Tangsibi Bumthang

7 Ura Bumthang

8 Hedi Gasa

9 Lunana Gasa

10 Tshozhong Gasa

11 Laya Gasa

12 Mera Trashigang

13 Gangyul Thimphu

14 Lingshi Thimphu

15 Soi Thimphu

16 Barshong Thimphu


103 of 115

Annexure 6: Projection of supply of medical and teaching professionals in 11th FYP

Sl.No Degree 2014 2015 2016 2017 2018 TOTAL

Health

1 MBBS 20 36 31 38 23 148

2 BDS 7 9 7 11 2 36

3 B.Sc.Nursing 32 8 10 - - 50

4 B.Sc.Pharmacy 4 3 8 - - 15

5 B.Sc.Physiotherapy 1 - 4 3 - 8

6 B.Sc.Allied Health Sciences - - - - - -

7 B.Sc.Medical Lab. Technology 4 4 4 4 - 16

8 B.Sc.Radio Technology 1 - - - - 1

9 B.Biomedical Engineering 1 - 3 3 - 7

10 B.Medical Radio Imaging Tech. 1 - 2 - - 3

11 B.Sc.Nutrition and Diet - - - - - -

12 Homeopathic Medicine and Surgery - - - 4 - 4

Total (Health) 71 60 69 63 25 288

Education

1 B.Ed 531 761 672 672 - 2,636

2 PGDE 220 255 255 255 - 985

Total (Education) 751 1,016 927 927 - 3,621

Source: Civil Service Statistics, 2013, Royal Civil Service Commission

Annexure 7: Recommendation for One time Lumpsum Personal Effects Allowance on Transfer from and to HQ

Title / Posi-tion

New York

Brus-sels

GenevaKu-wait

BKK DhakaNew Delhi

Kolkata

Currency USD EURO CHF USD USD USD INR INR

1Head of Mission/Ambassador

1,750 2,250 2,100 2,000 600 250 21,500 12,500

2 Diplomat (EX III/P1)

1,750 2,250 2,100 2,000 600 250 21,500 12,500

3 Diplomat (P2-P3)

1,750 2,250 2,100 2,000 600 250 21,500 12,500

4 Diplomat (P4-P5)

1,750 2,250 2,100 2,000 600 250 21,500 12,500


104 of 115

5Non-Diplo-matic Staff (S1-S5)

- - - 1,000 300 125 10,750 6,250

6Non-Diplo-matic Staff (O1-O4)

- - - 1,000 300 125 10,750 6,250

Note: Includes accompanied Baggage plus whole family;

Annexure 8: Recommendation for One time Lumpsum Personal Effects Allowance on Transfer from Missions/Embassies to HQ

Sl. No

Title / Position

New York

Brussels Geneva Kuwait Bangkok DhakaNew Delhi

Kol-kata

Currency USD EURO CHF USD USD USD INR INR

1

Head of Mission/ Ambassa-dor

5,500 3,000 3,650 2,200 2,750 1,250 63,000 40,000

2Diplomat (EX III/P1)

5,500 3,000 3,650 2,200 2,750 1,250 63,000 40,000

3Diplomat (P2-P3)

5,500 3,000 3,650 2,200 2,750 1,250 63,000 40,000

4Diplomat (P4-P5)

5,500 3,000 3,650 2,200 2,750 1,250 63,000 40,000

5

Non-Dip-lomatic Staff (S1-S5)

1,100 1,350 600 32,000 20,000

6

Non-Dip-lomatic Staff (O1-O4)

1,100 1,350 600 32,000 20,000

Note: Actual after completing required procurement process and production of boarding pass or onetime payment without having to account


105 of 115

Annexure 9: Recommendation for One Time Lumpsum Home Leave Passage Allowance

Sl.No Title / PositionNew York

Brus-sels

Ge-neva

Kuwait BKK DhakaNew Delhi

Kolkata

Currency USD EURO CHF USD USD USD INR

1Head of Mis-sion/Ambas-sador

2,000 2,000 2,000 700 250 180 15,000 8,000

2Diplomat (EX III/P1)

2,000 2,000 2,000 700 250 180 15,000 8,000

3Diplomat (P2-P3)

2,000 2,000 2,000 700 250 180 15,000 8,000

4Diplomat (P4-P5)

2,000 2,000 2,000 700 250 180 15,000 8,000

5Non-Diplo-matic Staff (S1-S5)

700 250 180 15,000 8,000

6Non-Diplo-matic Staff (O1-O4)

700 250 180 15,000 8,000

For head of Mission/ Ambassador addition-al to meet air ticket cost difference (Busi-ness - Economy )

500 500 500 250 100 80 5,000 3,000

Note: Self, Spouse and max of 3 children below 18 yrs

Annexure 10: Recommendation for Furnishing Allowance

Sl.No Title / Position New York BrusselsGe-neva

Kuwait BangkokSouth Asia

Currency USD Euro CHF USD USD USD

1Head of Mission/Am-bassador

- - - - - -

2 Diplomat (EX III/P1) 5,000 5,000 5,000 5,000 3,000 2,000

3 Diplomat (P2-P3) 5,000 5,000 5,000 5,000 3,000 2,000

4 Diplomat (P4-P5) 5,000 5,000 5,000 5,000 3,000 2,000

5Non-Diplomatic Staff (S1-S5)

- - - 2,500 1,500 1,000

6Non-Diplomatic Staff (O1-O4)

- - - - 1,500 1,000

Note: One time lumpsum allowance and for unfurnished accommodation only


106 of 115

Annexure 11: DSA Rates (Travel Abroad)

Sl.

NoCountry

Present DSA

($)

Re-comm. DSA ($)

1 Afghanistan 140 140

2 Albania 140 140

3 Algeria 150 200

4 Angola 250 250

5 Anguilla 300

6 Antigua 230 230

7 Argentina 140 200

8 Armenia 135 135

9 Aruba 200

10 Australia 160 200

11 Austria 180 200

12 Azerbaijan 130 150

13 Bahamas 210 210

14 Bahrain 180 200

15 Bangladesh 100 100

16 Barbados 195 195

17 Belarus 145 145

18 Belgium 180 200

19 Belize 168 170

20 Benin 80 115

21 Bermuda 180 200

22 Bolivia 130 130

23Bosnia & Herzegovina

135 135

24 Botswana 125 150

25 Brazil 150 170

26British virgin island

200

27 Brunei 160 160

28 Bulgaria 150 170

29 Burkina Faso 130 140

Sl.

NoCountry

Present DSA

($)

Re-comm. DSA ($)

30 Burundi 186 190

31 Cambodia 90 90

32 Cameroon 100 165

33 Canada 175 200

34Canary island

114 150

35 Cape Verde 120 150

36Cayman Islands

200 200

37Central Afri-can republic

110 130

38 Chad 195 150

39 Chile 150 150

40 China 120 160

41China, Hong Kong

200 200

42China, Ma-cau

130 200

43 Colombia 125 180

44 Comoros 100 200

45 Congo 160

46Congo Dem Rep

100 160

47 Cook islands 100 140

48 Costa Rica 130 150

49 Cote d’ivoire 120 150

50 Croatia 200 200

51 Cuba 200 200

52 Cyprus 100 150

53Czech Re-public

200 200

54 Denmark 200 200

55 Djibouti 130 130


107 of 115

Sl.

NoCountry

Present DSA

($)

Re-comm. DSA ($)

56 Dominica 200 170

57Dominica Republic

170 170

58 Egypt 130 150

59 Ethiopia 90 100

60 Ecuador 150 160

61Equatorial Guinea

160

62 El Salvador 160 160

63 Eretria 90 100

64 Estonia 150 190

65 Fiji 100 190

66 Finland 210 210

67 France 200 200

68 Gambia 90 150

69 Gabon 150

70 Georgia 130 130

71 Germany 200 200

72 Ghana 200 200

73 Gibraltar 125 150

74 Greece 180 200

75 Greenland 200 200

76 Grenada 200 200

77 Guam 150 180

78 Guatemala 140 140

79 Guinea 200

80Guinea Bis-sau

160

81 Guyana 150 160

82 Haiti 170 150

83 Honduras 200 150

84 Hungary 180 200

Sl.

NoCountry

Present DSA

($)

Re-comm. DSA ($)

85 Iceland 230 230

86 India Given Separately

87 Indonesia 150 160

88 Iran 160 160

89 Iraq 80 120

90 Ireland 200 200

91 Israel 180 200

92 Italy 210 200

93 Jamaica 230 200

94 Japan 300 300

95 Jordan 140 160

96 Kazakhstan 150 160

97 Kenya 200 160

98 Kiribati 70 100

99 Kuwait 200 200

100 Kyrgyzstan 145 140

101 Lao 60 100

102 Latvia 200 200

103 Lebanon 150 160

104 Lesotho 70 100

105 Liberia 200 160

106 Libya 100 160

107 Lithuania 175 175

108 Luxembourg 160 200

109 Macedonia 130 200

110 Madagascar 100 120

111 Malawi 95 100

112 Malaysia 120 130

113 Maldives 120 150

114 Mali 100 100

115 Malta 200 200

116 Mauritania 100


108 of 115

Sl.

NoCountry

Present DSA

($)

Re-comm. DSA ($)

117 Mauritius 150 170

118 México 230 200

119 Micronesia 100 100

120 Moldova 250 150

121 Monaco 200

122 Mongolia 120 150

123 Montenegro 130

124 Montserrat 140 170

125 Morocco 160 160

126 Mozambique 165 160

127 Myanmar 120 120

128 Namibia 70 100

129 Nauru 100

130 Nepal 120 120

131 Netherlands 200 200

132Netherlands, Antilles

200

133New Zea-land

145 200

134 Nicaragua 120 120

135 Niger 80 100

136 Nigeria 130 150

137 North Korea 170 170

138 Niue 100

139 Norway 210 230

140 Oman 160 160

141 Pakistan 120 130

142 Palau 150

143 Panama 150 150

144Papua New Guinea

130 130

145 Paraguay 150 150

Sl.

NoCountry

Present DSA

($)

Re-comm. DSA ($)

146 Peru 200 150

147 Philippines 130 130

148 Poland 240 200

149 Portugal 200 200

150 Puerto Rico 160 160

151 Qatar 140 160

152 Romania 200 200

153Russian Fed-eration

260 260

154 Rwanda 220 140

155 Samoa 100 120

156Sao Tome and Principe

120

157 Saudi Arabia 200 200

158 Senegal 110 150

159 Serbia 160

160 Seychelles 200 200

161 Sierra Leone 130 130

162 Singapore 180 180

163 Slovenia 150 200

164 Slovak Rep 150 170

165Solomon Islands

75 150

166 Somalia 75 100

167 South Africa 120 160

168 South Korea 200 200

169 Spain 200 200

170 Sri Lanka 120 130

171St. Kitts and Nevis

150

172 St. Lucia 150

173St. Vincent Grenadines

150


109 of 115

Sl.

NoCountry

Present DSA

($)

Re-comm. DSA ($)

174 Sudan 144 160

175 Suriname 130 130

176 Swaziland 78 100

177 Sweden 230 230

178 Switzerland 220 220

179Syrian Arab Republic

160 160

180 Taiwan 165 165

181 Tajikistan 140 140

182 Tanzania 140 140

183 Thailand 130 130

184 Timor-Leste 100

185 Togo 100 100

186 Tokelau 75

187 Tonga 100 150

188Trinidad & Tobago

150

189 Turkey 130 200

190 Tunisia 145 120

191 Turkmenistan 115 150

192Turks & Ca-icos Island

150

193 Tuvalu 100

194 Uganda 135 135

195 Ukraine 130 200

196United Arab Emirates

210 210

197United King-dom

220 220

198 USA 200 200

199 Uruguay 180

200 Uzbekistan 200 120

201 Vanuatu 160

Sl.

NoCountry

Present DSA

($)

Re-comm. DSA ($)

202 Venezuela 225 200

203 Vietnam 100 100

204Virgin Island USA

200

205 West Bank 130

206 Yemen 90 100

207 Yugoslavia 160 160

208 Zambia 85 100

209 Zimbabwe 120 100


110 of 115

Annexure 12: Pay scale of SOEs under MoF

Grade Minimum Increment Maximum1 (BDBL & NPPF) 40,970 1,025 61,470

1 34,630 865 51,930

2 27,270 680 40,870

3 24,085 600 36,085

4 21,120 530 31,720

5 18,805 470 28,205

6 15,400 385 23,100

7 14,170 355 21,270

8 12,840 320 19,240

9 11,730 295 17,630

10 10,410 260 15,610

11 9,630 240 14,430

12 9,135 230 13,735

13 8,585 215 12,885

14 7,805 195 11,705

15 7,245 180 10,845

16 6,890 170 10,290

17 6,557 165 9,857

18 6,030 150 9,030

Annexure 13: The pay scales of CEOs of SOEs under MoF.

Sl. No. SoEs Basic Salary

1 BDBL 70,000

2 FCB 50,000

3 BAIL 50,000

4 WCCL 50,000

5 Bhutan Post 70,000

6 Kuensel Corp. 60,990

7 BBSC 50,000

8 NPPF 70,000

9 CDCL 70,000

10 NHDC 70,000


111 of 115

Annexure 14: DHI Salary Structure

Position Level

Profes-sionalService

Position Level Corporate Service Mini. Incr. Max.

PS5 Director CS5 Director 60,100 3,287 125,830

PS4Associate Director CS4 Associate Director 50,800 2,778 106,370

PS3 Sr. Analyst CS3 Sr. Manager 39,750 2,174 83,220

PS2 Analyst CS2 Manager 28,400 1,553 59,470

PS1Associate Analyst CS1 Associate Manager 19,360 1,059 40,500

LevelOperational Ser-vices

OS3

Sr. OS/Admin./

16,755 916 35,080Asst./PA/Accoun-tant

OS2

Office Secretary/

13,580 743 28,430

Admin. Asst./ PA/ Accountant/Recep-tionist

OS1 Driver 9,390 513 19,660

Level Wage Services

WS

Messenger/Secu-rity/

Nu. 180 per dayGuard/Sweeper

Annexure 15: DHI Owned Companies Salary Structure

Position Level

DGPC BPC BTL BOB Drukair NRDCL Average BPBP BP BP BP BP BP

1 45,125 44,246 - 44,246 44,246 44,615 44,496

2 38,145 37,402 37,402 37,402 37,402 37,715 37,578

3 29,842 29,450 29,450 29,450 29,450 29,700 29,557

4 26,352 26,015 26,015 26,015 26,015 26,230 26,107

5 23,099 22,808 22,808 22,808 22,808 23,000 22,889

6 20,581 20,304 20,304 20,304 20,304 20,475 20,379


112 of 115

Position Level

DGPC BPC BTL BOB Drukair NRDCL Average BPBP BP BP BP BP BP

7 16,848 16,632 16,625 16,632 16,632 16,770 16,690

8 15,404 15,302 15,302 15,302 15,302 15,430 15,341

9 13,959 13,865 13,865 13,865 13,865 13,985 13,900

10 12,758 12,670 12,670 12,670 12,670 12,775 12,702

11 11,313 11,239 11,239 11,239 11,239 11,335 11,267

12 10,476 10,402 10,402 10,402 10,402 10,490 10,429

13 9,869 9,869 9,869 9,869 9,869 9,950 9,882

14 9,268 9,268 9,268 9,268 9,268 9,350 9,282

15 8,424 8,424 8,424 8,424 8,424 8,495 8,436

16 7,823 7,823 7,823 7,823 7,823 7,890 7,834

17 7,587 7,439 - 7,439 7,439 - 7,476

18 7,223 7,088 - 7,081 7,081 6,345 6,963

Annexure 16: Salary scales of CEOs/MD of DHI and DOCs

Sl. No. Position Level Basic Pay

1 Chairman, DHI 92,000

2 CEO, DHI 80,000

3 MD, DGPC 75,000

4 MD, BPC 75,000

5 CEO, BTL 70,000

6 CEO, BOB 75,000

7 CEO, Drukair 70,000

8 CEO, NRDCL 70,000


113 of 115

Annexure 17: Salary Structure of RMA

Position Level Min. Increment Max.

Governor 95,000 1,900 114,000

Deputy Governor 80,000 1,600 96,000

Category I – Officer

Senior Manager/Director 50,870 1,270 88,970

Manager/Deputy Director 44,280 1,110 77,580

Senior Staff Officer 38,590 970 67,690

Staff Officer 33,570 840 58,770

Officer Grade I 29,230 730 51,130

Officer Grade II 25,460 640 44,660

Officer Grade III 22,140 550 38,640

Category II - Administrative Staff

Assistant Grade I 19,170 480 33,570

Assistant Grade II 16,870 420 29,470

Assistant Grade III 15,010 380 26,410

Assistant Grade IV 13,360 330 23,260

Assistant Grade V 11,760 290 20,460

Category III - Administrative Support Staff

Adm. Support Staff Grade I 17,060 430 29,960

Adm. Support Staff Grade II 14,840 370 25,940

Adm. Support Staff Grade III 13,210 330 23,110

Adm. Support Staff Grade IV 11,760 290 20,460

Adm. Support Staff Grade V 10,470 260 18,270

Category IV - General Support Staff

General Support Staff Grade I 14,940 370 26,040

General Support Staff Grade II 13,000 330 22,900

General Support Staff Grade III 11,310 280 19,710

General Support Staff Grade IV 10,070 250 17,570

General Support Staff Grade V 8,760 220 15,360


114 of 115

Annexure 18: Civil Service Pay Scales Trend

Position Level

Pay Scale 1985Pay Scale 1988

(March)Pay Scale 1996

(July)Pay Scale 1997

(July)Pay Scale1999

(July)

Jana

ury

2005

Pay Scale 2006 (July)

Jana

ury

2009


Jana

ury

2011

Min. Incr. Max. Min. Incr. Max. % Min. Incr. Max. % Min. Incr. Max. % Min. Incr. Max. % Min. Incr. Max. % Min. Incr. Max. %

EX/ES-1 2,700 180 4,500 11,900 250 14,400 341% 15,500 325 20,375 30% 18,600 400 24,600 20% 22,350 480 29,550 20%

45%

Rev

isio

n on

199

9 Sc

ale

whi

ch w

as p

rovi

ded

as L

umps

um S

alar

y A

llow

ance

from

Janu

ary

2005

till

June

200

8

33,970 680 44,170 52%

35%

Rev

isio

n on

200

6 Sc

ale

whi

ch w

as p

rovi

ded

as L

umps

um S

alar

y A

llow

ance

from

Janu

ary

2009

till

July

201

0

45,860 915 59,585 35%

20%

Rev

isio

n on

200

6 Sc

ale

whi

ch w

as p

rovi

ded

as L

umps

um S

alar

y A

llow

ance

from

Janu

ary

2011

6,794

EX/ES-2 2,400 150 4,200 9,900 225 12,150 313% 13,000 290 17,350 31% 15,600 350 20,850 20% 18,750 420 25,050 20% 28,500 570 37,050 52% 38,475 770 50,025 35% 5,700

EX/ES-3 2,100 125 3,600 8,250 200 10,250 293% 10,975 260 14,875 33% 13,200 320 18,000 20% 15,850 390 21,700 20% 24,090 480 31,290 52% 32,520 650 42,270 35% 4,818

P1 1,800 100 3,300 6,350 175 8,450 253% 8,575 225 11,950 35% 10,300 270 14,350 20% 12,400 325 17,275 20% 18,970 380 24,670 53% 25,610 510 33,260 35% 3,794

P2 1,600 90 2,950 5,550 150 7,350 247% 7,575 200 10,575 36% 9,100 240 12,700 20% 10,950 290 15,300 20% 16,755 335 21,780 53% 22,620 450 29,370 35% 3,351

P3 1,350 80 2,550 4,800 125 6,300 256% 6,650 175 9,275 39% 8,000 210 11,150 20% 9,600 260 13,500 20% 14,690 295 19,115 53% 19,830 395 25,755 35% 2,938

P4 1,200 70 2,250 4,200 100 5,400 250% 5,900 150 8,150 40% 7,100 180 9,800 20% 8,550 220 11,850 20% 13,080 260 16,980 53% 17,660 355 22,985 35% 2,616

P5 1,000 60 2,200 3,350 75 4,475 235% 4,825 125 6,700 44% 5,800 150 8,050 20% 7,000 185 9,775 21% 10,710 215 13,935 53% 14,460 290 18,810 35% 2,142

S1 950 55 2,050 3,000 70 4,050 216% 4,400 110 6,600 47% 5,300 135 8,000 20% 6,400 165 9,700 21% 9,855 200 12,855 54% 13,305 265 17,280 35% 1,971

S2 850 50 1,850 2,700 65 3,675 218% 4,000 95 5,900 48% 4,800 115 7,100 20% 5,800 140 8,600 21% 8,930 180 11,630 54% 12,005 240 15,605 34% 1,786

S3 800 45 1,700 2,400 60 3,300 200% 3,650 85 5,350 52% 4,400 105 6,500 21% 5,300 130 7,900 20% 8,160 165 10,635 54% 11,015 220 14,315 35% 1,632

S4 725 40 1,525 2,100 55 3,090 190% 3,250 80 4,850 55% 3,900 100 5,900 20% 4,700 120 7,100 21% 7,240 145 9,415 54% 9,775 195 12,700 35% 1,448

S5 700 35 1,400 1,900 50 2,800 171% 3,000 70 4,400 58% 3,600 85 5,300 20% 4,350 105 6,450 21% 6,700 135 8,725 54% 9,045 180 11,745 35% 1,340

O1 680 30 1,280 1,750 45 2,560 157% 2,825 65 4,125 61% 3,400 80 5,000 20% 4,100 100 6,100 21% 6,355 130 8,305 55% 8,580 170 11,130 35% 1,271

O2 650 25 1,150 1,600 40 2,320 146% 2,650 55 3,750 66% 3,200 65 4,500 21% 3,850 80 5,450 20% 5,970 120 7,770 55% 8,060 160 10,460 35% 1,194

O3 600 20 1,000 1,400 35 2,100 133% 2,400 50 3,400 71% 2,900 60 4,100 21% 3,500 75 5,000 21% 5,425 110 7,075 55% 7,325 145 9,500 35% 1,085

O4 550 15 850 1,300 30 1,900 136% 2,250 40 3,050 73% 2,700 50 3,700 20% 3,250 60 4,450 20% 5,040 100 6,540 55% 6,805 135 8,830 35% 1,008

GSP-I 535 12 775 1,200 25 1,700 124% 2,125 35 2,825 77% 2,550 42 3,390 20% 3,150 50 4,100 24% 4,790 95 6,215 52% 6,465 130 8,415 35% 958

GSP-II 520 10 720 1,100 20 1,500 112% 2,000 25 2,500 82% 2,400 30 3,000 20% 3,000 40 3,640 25% 4,560 90 5,910 52% 6,155 125 8,030 35% 912


115 of 115

Annexure 18: Civil Service Pay Scales Trend

Position Level

Pay Scale 1985Pay Scale 1988

(March)Pay Scale 1996

(July)Pay Scale 1997

(July)Pay Scale1999

(July)

Jana

ury

2005


Jana

ury

2009


Jana

ury

2011

Min. Incr. Max. Min. Incr. Max. % Min. Incr. Max. % Min. Incr. Max. % Min. Incr. Max. % Min. Incr. Max. % Min. Incr. Max. %

EX/ES-1 2,700 180 4,500 11,900 250 14,400 341% 15,500 325 20,375 30% 18,600 400 24,600 20% 22,350 480 29,550 20%

45%

Rev

isio

n on

199

9 Sc

ale

whi

ch w

as p

rovi

ded

as L

umps

um S

alar

y A

llow

ance

from

Janu

ary

2005

till

June

200

8

33,970 680 44,170 52%

35%

Rev

isio

n on

200

6 Sc

ale

whi

ch w

as p

rovi

ded

as L

umps

um S

alar

y A

llow

ance

from

Janu

ary

2009

till

July

201

0

45,860 915 59,585 35%

20%

Rev

isio

n on

200

6 Sc

ale

whi

ch w

as p

rovi

ded

as L

umps

um S

alar

y A

llow

ance

from

Janu

ary

2011

6,794

EX/ES-2 2,400 150 4,200 9,900 225 12,150 313% 13,000 290 17,350 31% 15,600 350 20,850 20% 18,750 420 25,050 20% 28,500 570 37,050 52% 38,475 770 50,025 35% 5,700

EX/ES-3 2,100 125 3,600 8,250 200 10,250 293% 10,975 260 14,875 33% 13,200 320 18,000 20% 15,850 390 21,700 20% 24,090 480 31,290 52% 32,520 650 42,270 35% 4,818

P1 1,800 100 3,300 6,350 175 8,450 253% 8,575 225 11,950 35% 10,300 270 14,350 20% 12,400 325 17,275 20% 18,970 380 24,670 53% 25,610 510 33,260 35% 3,794

P2 1,600 90 2,950 5,550 150 7,350 247% 7,575 200 10,575 36% 9,100 240 12,700 20% 10,950 290 15,300 20% 16,755 335 21,780 53% 22,620 450 29,370 35% 3,351

P3 1,350 80 2,550 4,800 125 6,300 256% 6,650 175 9,275 39% 8,000 210 11,150 20% 9,600 260 13,500 20% 14,690 295 19,115 53% 19,830 395 25,755 35% 2,938

P4 1,200 70 2,250 4,200 100 5,400 250% 5,900 150 8,150 40% 7,100 180 9,800 20% 8,550 220 11,850 20% 13,080 260 16,980 53% 17,660 355 22,985 35% 2,616

P5 1,000 60 2,200 3,350 75 4,475 235% 4,825 125 6,700 44% 5,800 150 8,050 20% 7,000 185 9,775 21% 10,710 215 13,935 53% 14,460 290 18,810 35% 2,142

S1 950 55 2,050 3,000 70 4,050 216% 4,400 110 6,600 47% 5,300 135 8,000 20% 6,400 165 9,700 21% 9,855 200 12,855 54% 13,305 265 17,280 35% 1,971

S2 850 50 1,850 2,700 65 3,675 218% 4,000 95 5,900 48% 4,800 115 7,100 20% 5,800 140 8,600 21% 8,930 180 11,630 54% 12,005 240 15,605 34% 1,786

S3 800 45 1,700 2,400 60 3,300 200% 3,650 85 5,350 52% 4,400 105 6,500 21% 5,300 130 7,900 20% 8,160 165 10,635 54% 11,015 220 14,315 35% 1,632

S4 725 40 1,525 2,100 55 3,090 190% 3,250 80 4,850 55% 3,900 100 5,900 20% 4,700 120 7,100 21% 7,240 145 9,415 54% 9,775 195 12,700 35% 1,448

S5 700 35 1,400 1,900 50 2,800 171% 3,000 70 4,400 58% 3,600 85 5,300 20% 4,350 105 6,450 21% 6,700 135 8,725 54% 9,045 180 11,745 35% 1,340

O1 680 30 1,280 1,750 45 2,560 157% 2,825 65 4,125 61% 3,400 80 5,000 20% 4,100 100 6,100 21% 6,355 130 8,305 55% 8,580 170 11,130 35% 1,271

O2 650 25 1,150 1,600 40 2,320 146% 2,650 55 3,750 66% 3,200 65 4,500 21% 3,850 80 5,450 20% 5,970 120 7,770 55% 8,060 160 10,460 35% 1,194

O3 600 20 1,000 1,400 35 2,100 133% 2,400 50 3,400 71% 2,900 60 4,100 21% 3,500 75 5,000 21% 5,425 110 7,075 55% 7,325 145 9,500 35% 1,085

O4 550 15 850 1,300 30 1,900 136% 2,250 40 3,050 73% 2,700 50 3,700 20% 3,250 60 4,450 20% 5,040 100 6,540 55% 6,805 135 8,830 35% 1,008

GSP-I 535 12 775 1,200 25 1,700 124% 2,125 35 2,825 77% 2,550 42 3,390 20% 3,150 50 4,100 24% 4,790 95 6,215 52% 6,465 130 8,415 35% 958

GSP-II 520 10 720 1,100 20 1,500 112% 2,000 25 2,500 82% 2,400 30 3,000 20% 3,000 40 3,640 25% 4,560 90 5,910 52% 6,155 125 8,030 35% 912

Date post:	03-Jan-2017
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