7th CPC Terms of Reference to include DA Merger and Interim Relief

In a bid to woo central government employees ahead of General Elections, the UPA government is expected to ask the seventh pay commission to  consider merging 50% dearness allowance with basic pay of the employees.

This will form part of the 7th CPC terms of reference (ToR), to be considered by the Cabinet this week. The Commission may suggest interim relief as well.

Officials said the ToR of the Pay Commission categorically states that a proposal in this regard should be actively considered.

The hikes will be all the more appealing as the Centre is expected to increase the dearness allowance by 10% to 100% by the end of February.  Usually, the DA is merged with the basic pay when the former  goes beyond 50%. However, DA is 90%, but it has not been merged so far.

Assuming an employee gets Rs 100 as basic pay and Rs 100 as DA at present, the basic will rise to Rs 150, even if 50% allowance is merged.

A higher basic pay will also impact the house rent allowance (HRA) of employees as it is calculated at 30% of the basic pay for central government employees.

Dearness Allowance is linked to the consumer price index (industrial workers). The government uses CPI-IW data of the past 12 months to arrive at a quantum for calculating any DA hike. The allowance will be announced from January. As such, the retail inflation for industrial workers between January 1 to December 31, 2013 would be used to take a final call on the matter. The average inflation during this period had stood at 10.66%.

Earlier this month, the government had constituted the Pay Commission under the chairmanship of former Supreme Court Judge Ashok Kumar Mathur.

The other members of the panel are Petroleum Secretary Vivek Rae (full-time member), National Institute of Public Finance and Policy Director Rathin Roy (part-time member) and Officer on Special Duty in the Expenditure Department Meena Agarwal (Secretary).

The Commission’s recommendations would be implemented from January 1, 2016, officials said. However, it may recommend interim relief as well, they added.

The recommendations of the Commission, will directly benefit almost 50 lakh employees and 30 lakh pensioners. Employees of states governments which will adopt the recommendations of the 7th Pay Commission will also benefit.