New Delhi – The central government has officially confirmed that it is not examining any proposal to merge dearness allowance (DA) with the basic pay of central government employees under the 8th Pay Commission framework. This significant clarification was provided to Parliament on Monday, addressing widespread speculation and concerns among employee unions regarding potential changes to the salary structure.
Minister of State for Finance Pankaj Chaudhary delivered this clarification in a written response to the Lok Sabha on December 1, as the Winter Session of Parliament commenced. The statement comes just days after the government issued the Terms of Reference (ToR) for the 8th Pay Commission, which will undertake comprehensive review of compensation structures for central government employees.
Official Parliamentary Statement on DA Merger
“No proposal regarding merger of the existing dearness allowance with the basic pay is under consideration with the government at present,” Chaudhary stated categorically in his written reply. This definitive statement aims to dispel rumors and provide clarity to approximately 50 lakh central government employees who have been closely monitoring developments related to the 8th Pay Commission.
The minister further elaborated on the government’s rationale for maintaining the current DA structure. “In order to adjust the cost of living and to protect Basic Pay/Pension from erosion in real value on account of inflation, the rates of DA/DR are revised periodically every 6 months on the basis of All India Consumer Price Index for Industrial Workers (AICPI-IW) released by Labour Bureau, Ministry of Labour and Employment,” the parliamentary reply stated.
Understanding the DA Revision Mechanism
The current system of dearness allowance serves as a crucial buffer against inflation for central government employees. Under the existing framework, DA rates are revised every six months based on the All India Consumer Price Index for Industrial Workers. This periodic adjustment mechanism ensures that employees’ purchasing power remains protected despite fluctuations in the cost of living.
The bi-annual revision system has been instrumental in maintaining the real value of salaries and pensions, providing automatic adjustments that respond to changing economic conditions without requiring legislative intervention or extended negotiations.
Employee Unions’ Demands for DA Merger
Despite the government’s clarification regarding the 8th Pay Commission, several employee unions have been actively campaigning for an immediate merger of 50 percent of the dearness allowance with basic pay. These unions argue that such a merger would significantly increase the base salary, which would subsequently result in higher DA calculations in future revisions.
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With the 8th Pay Commission recommendations expected to be implemented only after 2027, employee groups have been advocating for an early DA-basic pay merger as an interim measure to improve their overall compensation structure. The unions contend that merging a portion of DA into basic pay would have cascading positive effects on various other allowances and retirement benefits that are calculated as percentages of basic salary.
Terms of Reference for 8th Pay Commission
The Union Cabinet approved the Terms of Reference for the 8th Pay Commission on October 28, marking a significant milestone in the periodic review of central government employee compensation. The commission will undertake a comprehensive examination of salary structures and benefits for nearly 50 lakh central government employees across various departments and ministries.
Former Supreme Court judge Ranjana Prakash Desai has been appointed as the chairperson of the 8th Pay Commission, bringing extensive judicial experience and understanding of constitutional matters to this crucial role. Her leadership is expected to ensure thorough and balanced consideration of all stakeholders’ interests.
Implementation Timeline and Expected Impact
According to Information and Broadcasting Minister Ashwini Vaishnaw, who addressed the media at a Cabinet briefing, the 8th Pay Commission panel will submit its recommendations within 18 months of its constitution. The recommendations are likely to come into effect from January 1, 2026, providing a clear timeline for employees anticipating salary revisions.
The government announced the formation of the 8th Pay Commission in January 2025 to examine and recommend changes in salaries and other benefits for central government employees. This periodic review represents a continuation of the established practice of constituting pay commissions to address evolving compensation needs.
Historical Context of Central Pay Commissions
Central Pay Commissions are constituted periodically to comprehensively review various aspects of the emoluments structure, retirement benefits, and other service conditions of central government employees. These commissions are tasked with making detailed recommendations on changes required to ensure fair and competitive compensation packages.
The recommendations of pay commissions are traditionally implemented after a gap of every ten years, allowing sufficient time for economic conditions to evolve and necessitate comprehensive salary structure reviews. This decadal pattern has been followed consistently to maintain relevance and adequacy of government employee compensation.
Future Implications for Government Employees
The government’s clear statement regarding the 8th Pay Commission and DA merger provides certainty to employees while the commission undertakes its comprehensive review. As the commission progresses with its work over the coming months, employees can expect detailed examination of all aspects of their compensation structure, even if immediate DA merger is not on the agenda.
