8th Pay Commission: Dearness allowance merger with Basic Pay - why the 6th CPC denied it

While it will take a long time for the real picture on the merger of DA with Basic Pay to emerge, this article goes back to the past, when the 6th Pay Commission recommended against merging DA with Basic Pay at any stage.

The 6th CPC's recommendation was in contrast to the 5th CPC, which had taken a different stand on the issue. Let's look at it in detail

The 5th Pay Commission had recommended that DA should be converted into DP each time the CPI increased by 50% over the base index. Based on this recommendation, the Government merged 50% of DA with the basic pay with effect from April 1, 2004.

The 6th CPC took note of the above in its report, but noted that the corollary to this merger should necessarily have been a revision in the existing reference base of price index of 306.33.

It said that the new reference base, therefore, should have been the 12 monthly average index when the index increased by 50%. "The reference base index would have, therefore, been higher than 306.33, given the uptrend in price levels, which would translate to a lower DA rate compared to the extant rates," it said.

The 6th CPC report further said, "Logically, therefore, conversion of dearness allowance as dearness pay should invariably be accompanied with simultaneous revision of the base index. 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."

Because of the above reason, the 6th CPC didn't recommend any merger of DA with basic.

"The Commission is, therefore, not recommending merger of dearness allowance with basic pay at any stage," it said.

Ahead of the 6th CPC, there was a demand provide DA thrice a year.

However, the 6th CPC approved the then existing rule for sanction of DA twice a year on January 1 and July 1.

"Accordingly, DA may continue to be sanctioned twice a year as on 1st January and 1st July payable with the salary of March and September respectively for administrative convenience with inflation neutralization being maintained at 100% at all levels," 6th CPC said.