Uttar Pradesh, Haryana, Tamil Nadu and Chhattisgarh have become the first four states to follow the recommendations of the Sixth Pay Commission and hike salaries for their employees.

Uttar Pradesh Chief Minister Mayawati on Monday announced the state would revise the salary of an estimated 721,000 employees on the lines of the pay panel recommendations.

The state commission, headed by Jagmohan Lal Bajaj, will submit a report on pay revision by December. The additional financial burden is estimated at Rs 5,189 crore (Rs 51.89 billion) per annum excluding arrears payment, which is pegged at Rs 14,775 crore (Rs 147.75 billion).

A decade back, when the fifth pay commission was implemented by the various state governments, it adversely impacted their finances.

The impact of the fifth pay commission for the states amounted to approximately 0.4 per cent - 0.6 per cent of gross domestic product while the cumulative impact was 1 per cent over the two-year period, according to a paper presented by Reserve Bank of India [Get Quote] Deputy Governor Rakesh Mohan.

However, this time around, states are in a better position to handle it because of the buoyant revenues from the value added tax.

Tamil Nadu, which traditionally matched its employee salaries with the central government staff, had on August 15 announced that this time too it would accept what the central pay commission recommended.

However, the state did not quantify the impact on its finances, saying it would wait till the central government came out with the details of the revised pay scheme.

Haryana too has announced that it would implement the recommendations of the sixth pay panel. A committee headed by chief secretary Dharam Vir has been constituted to study the recommendations, said Chief Minister Bhupinder Singh Hooda.

Haryana had made a provision of Rs 1,550 crore (Rs 15.5 billion) in its 2008-09 budget for the increase in salary and pension.

Chhattisgarh, which is headed for elections in a few months, said it would examine the recommendations of the sixth pay commission to give its employees a better pay deal.

"We are examining the central pay panel's recommendations to give a better package to the state employees," Chief Minister Raman Singh told reporters on Friday.

The state has around 250,000 employees. "Soon after the announcement, the CM called senior officials of the finance department and asked them to work out a solution to give a better deal to employees," sources said.

Other states like Punjab and Himachal Pradesh are also in the process of finalising pay increases for their employees.

(With inputs from R Krishna Das in Raipur and Vijay C Roy in Chandigarh)

• The Sixth Pay Commission