No Plans for Merging Dearness Allowance with Basic Pay: Finance Ministry Clarifies
The Finance Ministry clarified that there are currently no plans to merge 50% Dearness Allowance (DA) or Dearness Relief (DR) with the basic pay/pension for central government employees and pensioners as an interim measure ahead of the 8th Central Pay Commission (CPC) recommendations.
- The ministry’s stance comes amid persistent requests by employee associations for the merger due to rising inflation and erosion in real income.
Demand from Employee Associations
Recently, the National Council of Joint Consultative Machinery (NC-JCM) requested that the merger of DA with basic pay be included in the terms of reference for the upcoming 8th Pay Commission.
- The merger has long been a key demand of central government employees, particularly due to unprecedented inflationary pressures experienced over the past several years.
- The aim is to offer immediate financial relief by increasing the basic pay/pension, thus raising other allowances calculated on the basic amount.
Government’s Official Response
Minister of State for Finance, Pankaj Chaudhary, clearly stated in response to a query from Rajya Sabha MP Javed Ali Khan, that the government has no current proposal under consideration to merge 50% DA/DR with the basic pay/pension.
- The clarification provided in the Rajya Sabha on March 17, 2025, effectively ends speculations of interim relief prior to the 8th CPC recommendations.
Status of the 8th Pay Commission
As of now, the 8th Central Pay Commission has not been formally constituted, though it is expected to be announced formally by April 2025.
- Details such as the commission’s timeline and the specific terms of reference, including whether the DA merger will be reviewed, will be finalized and announced later.
- The Finance Ministry confirmed that these specifics will be decided in “due course,” without providing a definite timeframe.
Purpose and Calculation of Dearness Allowance
The central government provides Dearness Allowance (DA)/Dearness Relief (DR) periodically to safeguard employees and pensioners against inflation, ensuring their basic pay and pensions maintain purchasing power.
- DA and DR are reviewed and revised every six months based on fluctuations in the All India Consumer Price Index for Industrial Workers (AICPI-IW), as released by the Labour Bureau under the Ministry of Labour and Employment.
- Since the implementation of the 7th CPC recommendations from January 1, 2016, central employees and pensioners have already received 15 installments of DA/DR adjustments.
