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8th Pay Commission: Amidst demands from employee organizations to merge Dearness Allowance (DA) with Basic Pay, the government has clarified that there are currently no plans for such a merger.

DA Merger News: The Union Finance Ministry has explicitly stated that there is no proposal currently under consideration to merge Dearness Allowance (DA) with Basic Pay. Minister of State for Finance Pankaj Chaudhary has clarified in official parliamentary statements that the existing DA revision system will continue to address price rises and inflation; there are no preparations for a separate merger at this time.

The government has notified the 'Terms of Reference' (ToR) for the 8th Pay Commission. The Commission is currently visiting various states to consult with employee organizations and unions and is gathering their suggestions. Any major changes to the salary structure will now likely be seen only through the 8th Pay Commission itself.

What is the current DA rate?

It is worth noting that Dearness Allowance (DA) is a component of basic salary provided to central government employees, public sector employees, defense personnel, bank staff, and retired pensioners to mitigate the impact of rising inflation. It is revised twice a year—in January and July—based on the All-India Consumer Price Index (AICPI) determined under the 7th Central Pay Commission.

Typically, the announcement is made in March and October. A 2% hike in DA was implemented in January of this year, bringing it to 60% of the basic salary for central government employees and pensioners.

Why are there demands for a merger?

All allowances received by central government employees are determined based on a percentage of their basic salary. If 50% or 60% of the Dearness Allowance (DA) is merged with the basic pay, the take-home salary will increase; furthermore, since the basic pay rises, allowances linked to it—such as House Rent Allowance, Children's Education Allowance, Transport Allowance, and Hostel Subsidy—will also automatically increase. Merging DA with basic pay will also impact gratuity, as the calculation of gratuity and leave encashment for employees is based on both basic pay and DA. Consequently, this merger would result in financial gains amounting to lakhs of rupees for retiring employees across PF, pension, and gratuity payouts. The 5th Pay Commission had recommended that once DA crosses the 50% mark, it should immediately be merged with basic pay to preserve the employees' purchasing power. Now that DA has exceeded 60%, employees are demanding that the government implement this long-standing and equitable practice as an interim relief measure.