8th Pay Commission: Dearness Allowance merger with Basic Pay - what is this old rule back in demand?

The Staff Side said the 8th CPC should determine the percentage of dearness allowance/ dearness relief to be merged with pay and pension respectively. However, this demand is not new.

A rule regarding the merger of DA with basic pay once the former crossed 50% existed during the tenure of the 5th pay commission from 1996 to 2006. As per this rule, DA was merged with basic in 2004.

However, the 6th pay commission, whose term lasted between 2006 and 2016, removed this rule to merge DA with basic. The 7th pay commission in 2016 recommended to bring back this rule, but it was not accepted by the government.

What the 5th CPC said

The 5th pay commission had recommended the government to accept either one of the following two suggestions:

First, it said that in the future, the pay revision of central government employees should be entrusted to a permanent pay commission. It suggested that this permanent pay commission should draw its authority from a constitutional provision and whose recommendations, made annually, should be binding.

Second, alternatively, the 5th CPC suggested that dearness allowance should be converted into dearness pay every time the cost of living rises by 50% over the base level.

The 5th CPC believed that "DA would normally increase by 50% in a period of 5 years and that this relief could be combined with a decennial exercise of pay revision through a Pay Commission."

Further, the Fifth CPC recommended the constitution of the next pay Commission by 2003 so that its report was available by 2006. While the Government did not appoint the next pay panel in 2003, it allowed merger of 50% of dearness allowance with pay with effect from April 1, 2004.

What the 6th CPC said

The 6th CPC denied merging DA with basic pay. It recommended a revised pay structure based on running pay bands and grade pay. Due to this, it said conversion of dearness allowance would not be necessary.

"This conversion, however, is not necessary in the revised structure being recommended where increments are payable as a percentage of the pay in the pay band and grade pay thereon and provision has been made for all allowances/benefits to be revised periodically linked to the increase in the price index. The Commission is, therefore, not recommending merger of dearness allowance with basic pay at any stage," the 6th CPC said.

What the 7th CPC said

The 7th pay commission was of the view that the revision in the consolidated pay package should not be linked to the six-monthly dearness allowance hike provided to central government employees.

However, given the "erosion of purchasing power through inflation", the 7th CPC recommended that the consolidated pay package may be raised by 25% as and when dearness allowance increases by 50%.