Decision on merging DA with basic pay after Pay Commission recommendation

Come elections, and the bonanzas have begun. On Friday, the Cabinet cleared a 10 per cent hike in dearness allowance (DA) and dearness relief (DR) for 50 lakh serving and 30 lakh retired Central Government employees, offering them some relief from rising prices of essential commodities.

This is the second successive 10 per cent increase, making the total DA/DR equal to 100 per cent of basic salary. The additional DA will be applicable from January 1, but will be paid only after the disbursement of March salary.

DA/DR is revised twice a year on the basis of change in retail inflation for industrial workers. The first revision comes into effect from January 1, and the second, from July 1.

The DA hike will cost the exchequer around ₹6,390 crore in 2014-15, and if two months of the current fiscal (January and February) are added, then the amount will increase to ₹7,455 crore. Similarly, the annual outgo on account of DR will be ₹4,684 crore and ₹5,465 crore for the 12 and 14 months, respectively.

However, the decision regarding merger of DA/DR up to 50 per cent will be taken only after the Seventh Pay Commission finalises its recommendations. A senior Government official said the Cabinet had approved the terms of reference for the commission, which include merging of DA with basic pay.

This will facilitate announcement of interim relief. Earlier, the practice was to merge DA if it reached 50 per cent of the basic pay. A merger helps a person draw higher allowances, as these are a proportion of basic pay. It is estimated that the merger will lead salaries rising by up to 30 per cent.

Merger issue

The Sixth Pay Commission did not talk about merger. As a result, with the continuous increase, DA has now reached up to 100 per cent of basic pay. Employees unions, too, have been demanding merger of DA with basic pay.

The Government announced the setting up of the Seventh Pay Commission last year, headed by Ashok Kumar Mathur, a retired Supreme Court judge and retired Chairman of the Armed Forces Tribunal, with Petroleum Secretary Vivek Rae as full-time member.

The committee is likely to submit its report in next 20 months and its recommendations are likely to be implemented from January 1, 2016.

(This article was published on February 28, 2014)
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