Finance ministry rules out DA-Basic Pay merger in Eighth Pay Commission

Ending speculations that the dearness allowance (DA) may be merged with the basic pay once the eighth pay commission is implemented, the union finance ministry today said no such proposal is under consideration. It was widely speculated that the Commission, notified by the government on November 3, may consider merging the two, a move, which would have enhanced the salary base of the government employees.

“No proposal regarding the merger of the existing DA with the basic pay is under consideration with the government at present,” said union minister of state (finance) Pankaj Choudhary in a reply in the Lok Sabha. "To adjust the cost of living and to protect basic pay/pension from erosion in real value on account of inflation, the rates of DA, DR are revised periodically every 6 months on the basis of All lndia Consumer Price lndex for lndustrial Workers (AlCPl-l) released by Labour Bureau, Ministry of Labour and Employment," the minister said.

Choudhary was replying to a question whether the government proposes to merge the existing DA/DR with basic pay as an immediate relief measure for central government employees or pensioners who are facing unprecedented inflation during the last 30 years since DA/DR given to them is not in consonance with the real time retail inflation.

DA helps the government employees offset the rising prices and cost of living in the economy. Currently, DA stands at 58% of the basic pay. Merging DA with the basic pay would have enhanced the salary base, thereby increasing the overall salary as other benefits get factored in. It may be noted that the government notified constitution of the Eighth Central Pay Commission on November 3.

The terms of reference (ToR) of the 8th Central Pay Commission to study the pay structure, retirement benefits and other service conditions of central government employees, was approved by the union cabinet in October this year. The Commission will submit its recommendations within 18 months of its official formation.

The commission will consist of chairperson, one part-time member and one member-secretary. The panel may also send interim reports if some parts of its recommendations are finalised earlier during the study period.

While preparing its recommendations, the commission is expected to carefully examine the country’s economic conditions and the importance of maintaining fiscal discipline. It must also ensure that the government has enough resources for welfare schemes and development programmes.

The Central Pay Commissions are set up every ten years to update salaries and retirement benefits of government employees. The last pay commission was the 7th Central Pay Commission, and its recommendations were implemented from January 1, 2016.