Higher tax-free perks placate agitating MPs

Business Standard, August 22, 2010

Using the stoppage of the Civil Liability for Nuclear Damage Bill as a threat, several allies of the United Progressive Alliance including the Rashtriya Janata Dal (RJD), acting in unison with the Opposition, have managed another salary raise for Members of Parliament (MPs).

The Standing Committee had proposed to raise the monthly salary of MPs from Rs 16,000 to Rs 80,001 ? Rs 1 more than that of the cabinet secretary. The government, in turn, had favoured raising it to Rs 50,000. Agitating MPs weren?t prepared to settle for less than Rs 80,001. In a meeting with leaders of various political parties today, Finance Minister Pranab Mukherjee made another proposal. Instead of raising the salary, he suggested that the monthly constituency and office allowances be raised by Rs 10,000 each. The two allowances are currently Rs 20,000 each, and the government had proposed to double the amount. Mukherjee offered to raise these further to Rs 50,000 each. Though the increase of Rs 20,000 is below the Rs 30,000 increment sought by the MPs, these allowances are tax-free and hence the net impact is unlikely to be very different.

The Cabinet will take a final call on the matter on Monday. Informed sources said the final decision could be either of the two proposals, or a combination of the two.

Mulayam Singh Yadav of Samajwadi Party, Lalu Prasad of RJD and Gopinath Munde of the Bhartiya Janata Party had conducted a ?mock? Parliament yesterday and earned the ire of the Speaker, Meira Kumar. They also let the government know that they would not support the Civil Liability for Nuclear Damage Bill if their demand was not conceded.

* Some UPA allies, in unison with the Opposition, demand monthly salary be raised by another ‘30,000
* Finance Minister Pranab Mukherjee proposes allowances be raised instead
* The allowances, worth ‘20,000 more, are tax free
* Cabinet to take a final call on Monday; could choose between the two proposals or combine them
* MPs? salary Bill to be considered at the end of the ongoing Monsoon session
* Civil Nuclear Liability Bill to be tabled in Lok Sabha on Wednesday

In today?s meeting, Mukherjee took out a calculator and quickly started calculating the income tax burden that will fall on MPs like Prasad if their salaries are raised by Rs 30,000 per month. Prasad requested Mukherjee to waive off the tax. But Mukherjee said it is not possible. If MPs don?t pay income tax it will send the wrong signal to the aam aadmi, he gently reminded Prasad. In that case, Prasad suggested, the allowances should be raised and not the salary. After the meeting, Mukherjee held consultations with Expenditure Secretary Sushma Nath.

On the floor of the House during Zero Hour, National Democratic Alliance convenor Sharad Yadav said: ?The matter regarding the hike of salary of MPs has been resolved,? and added: ?The House will now function according to the rules.?

The government has also decided to bring the MPs? salary Bill at the fag end of the session. The top priority of the government is to pass the Civil Nuclear Liability Bill. Parliamentary Affairs Minister Pawan Kumar Bansal told reporters that the bill would be tabled in the Lok Sabha on Wednesday. It is important that the government have the Bill on its statue books before the visit of US President Barack Obama in November.

The ongoing Monsoon session of Parliament will be extended till August 31, Bansal said. All political parties have agreed to give this additional time to make up for the loss of time due to repeated adjournments in the first week of the session. According to the earlier schedule, the session, which started on July 26, was to conclude on August 27.

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