If you've been following the news about central government employees, you've probably heard the buzz around merging Dearness Allowance (DA) with basic pay. It’s been a hot topic, especially with inflation hitting highs we haven't seen in three decades. Employee unions have been vocal, pushing for this change as a form of relief. Well, the government has officially weighed in, and the answer is a clear "no" for now.
Key Highlights
- ✓ The government confirmed there is no proposal to merge Dearness Allowance (DA) with basic pay.
- ✓ Minister of State for Finance, Pankaj Chaudhary, made the statement in the Lok Sabha.
- ✓ Employee unions have been demanding the merger, especially since DA reached 58%.
- ✓ There are growing concerns about the Terms of Reference for the upcoming 8th Central Pay Commission. One key aspect to consider is
- ✓ A calculation shows a potential salary difference of over Rs 11,000 per month if the merger were to happen.
The Government's Firm Stance
The speculation finally came to a head in Parliament. In a written reply to a question in the Lok Sabha on Monday, the Minister of State for Finance, Pankaj Chaudhary, put the rumors to rest. Analysts note that He stated unequivocally that "No proposal regarding the merger of the existing Dearness Allowance with the basic is under consideration with the government at present. " This was a direct response to questions raised by MP Anand Bhadauria, who pointed out the immense pressure employees and pensioners are under due to unprecedented inflation.
The core of the argument from employee unions is that the current DA and Dearness Relief (DR) revisions just aren't keeping up with real-time retail inflation. With the Dearness Allowance hitting the 50% mark back in January 2024 and now standing at 58%, the demand to merge it with the basic pay has only grown louder. They see it as a necessary measure to provide some immediate financial relief.
Chaudhary did reiterate the existing mechanism, explaining that DA and DR rates are revised every six months. This brings us to This is done to protect the real value of salaries and pensions from being eroded by inflation. The whole process is tied to the All India Consumer Price Index for Industrial Workers (AlCPl-lW), which is released by the Labour Bureau.
Why Does This Merger Matter So Much. Let's Talk Numbers
So, what's all the fuss about, really. On the surface, merging DA with basic pay might not seem like an immediate cash windfall. The real advantage comes later. You see, when an employee's next allowance hike is calculated, it's based on their basic pay. If the basic pay is higher because the DA has been absorbed into it, every subsequent calculation results in a bigger number, leading to a higher overall salary.
To make this crystal clear, Manjeet Singh Patel, the National President of the All India NPS Employees Federation, broke it down with a practical example. Let's imagine an employee with a basic pay of Rs 76,500 in January 2024. At that time, DA was 50%. If the merger had happened, their modern basic pay would have become Rs 1,14,750. Fast forward to today, with increments and other allowances, their total salary would be around Rs 1,64,959.
However, since the merger didn't happen, that same employee's current salary is Rs 1,53,832. Industry experts suggest that Their basic pay saw a standard 3% increment, and the 58% DA is calculated on that modern, lower basic pay. The difference is significant.
The 8th Pay Commission and Deepening Concerns
This DA merger debate isn't happening in a vacuum. It's tied directly to the formation of the 8th Central Pay Commission (8th CPC), which the government officially notified via a resolution on November 3, 2025. While the formation of a modern pay commission is usually welcome news, the fine print in the notification has caused a lot of anxiety among employee and pensioner unions.
The main issue. One key aspect to consider is The Terms of Reference (ToR) for the 8th CPC seems to have some glaring omissions compared to previous commissions. Key provisions, especially around pension revision for existing pensioners, appear to be missing or are frustratingly unclear. This has triggered fears that a huge part of the commission's traditional mandate might be left out this time around.
Several MPs, including Javed Ali Khan and Ramji Lal Suman, have formally listed questions in the Rajya Sabha to get some clarity. Recent reports indicate that They're asking the government directly: Has pension revision been left out of the 8th CPC's scope. And if so, why this major departure from long-standing practice. The answers from the Finance Ministry are eagerly awaited.
Why Pensioners Are on Edge
This isn't just a technicality; it's a massive concern for the nearly 69 lakh pensioners who rely on these periodic revisions to keep their income in line with serving employees. For decades, Pay Commissions have been the mechanism to ensure fairness across generations of retirees. The system prevents a widening gap between what older and newer retirees receive.
If the 8th CPC doesn't handle pension revision, it would be a historic and worrying shift in policy. Adding fuel to the fire is some of the language in the ToR that references the "unfunded cost of non-contributory pension schemes. " Pensioner groups interpret this as a sign that financial pressures might be taking precedence over social security commitments.
Meanwhile, employee federations are gearing up. They've made it clear that if the government's replies confirm their fears, they are prepared to intensify their agitation. For now, millions of employees and pensioners are holding their breath, waiting for straight answers on these two critical issues.
Conclusion
So, here's the bottom line. The government has drawn a clear line in the sand: there are no plans to merge Dearness Allowance with basic pay at this time. While the existing system of semi-annual revisions continues, it falls short of the immediate relief many employees were hoping for, especially given the high inflation. Beyond this single issue, a much larger storm is brewing around the 8th Central Pay Commission, with serious questions about its scope and whether it will continue the tradition of revising pensions for retired staff. The story is far from over, and the coming weeks will be crucial as the government provides more clarity in Parliament.
