Pitfalls Of Populism? 'Fiscally Strained' Siddaramaiah Faces Tough Decision On OPS, 7th Pay Commission Amid Hefty Guarantees

Chief Minister Siddaramaiah may find himself in a financial bind as his government faces decisions on the 7th Pay Commission and the Old Pension Scheme (OPS), both challenging amid the hefty expenditures on five 'guarantee' schemes.

These issues are likely to influence the 3 June elections for the teachers' and graduates' constituencies, where government employees form a significant part of the electorate and are anticipating a government decision.

Implementing these demands will pose a significant challenge for Siddaramaiah, who, as finance minister, has already allocated a massive Rs 52,009 crore for the five guarantee schemes this fiscal year.

The 7th Pay Commission, led by former Chief Secretary K Sudhakar Rao, has recommended a 27.5 per cent increase in the basic salaries of government employees, which would cost the government an additional Rs 17,440.15 crore annually.

The NPS, a market-linked retirement plan, was introduced in Karnataka for employees who joined on or after 1 April 2006. However, some government employees are demanding a return to the OPS.

"Most states, including Karnataka, switched to NPS from the OPS after recognising that the latter could be unsustainable in the long run. Reverting to OPS would be fiscally disastrous for the state's finances in the long term and would necessitate cuts to welfare and developmental expenditure," the Medium Term Fiscal Plan 2024-2028 states.

Aware that indecision could negatively impact voters, especially government employees, Siddaramaiah addressed these issues at a Congress meeting on Sunday.

"The NPS was implemented when the JD(S)-BJP coalition was in power. You need to inform voters who are unaware of this. They are responsible for NPS, not Congress," Siddaramaiah said, adding that his government is "examining" the demand to eliminate NPS.

Regarding the salary hike as per the 7th Pay Commission, Siddaramaiah expressed optimism.

However, he noted that implementing the 6th Pay Commission during his first term as CM did not yield electoral support. "I took on a burden of Rs 10,600 crore. But you didn't support us," he said.