The ongoing anticipation for the 8th Pay Commission saw a fresh wave of speculation when central government employees and pensioners raised questions about the possibility of merging Dearness Allowance (DA) with basic pay. Recently, in response to a query in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary firmly stated that no such proposal is under consideration by the government. This clarification came after MP Anand Bhadauria highlighted the challenges posed by rising inflation on government employees and pensioners, suggesting that merging DA with basic pay could provide immediate relief.
In his written reply, Chaudhary stated, “No proposal regarding the merger of the existing dearness allowance with the basic is under consideration with the government at present.” This has put to rest speculation that the government might be looking at this as a quick fix for inflation, especially with growing concerns about the increased cost of living.
DA is a cost-of-living allowance given to government employees to offset the impact of inflation, while DR is provided to pensioners for the same purpose. These allowances are typically updated twice a year — around Diwali and Holi — based on inflationary trends. Despite these adjustments, there have been growing concerns among employees that the DA/DR rates do not always align with the pace of retail inflation, leading to dissatisfaction.
The 8th Pay Commission, formed following approval by the Union Cabinet in October 2025, is tasked with reviewing and recommending adjustments to the pay structure for central government employees. The Commission will also focus on pensions and allowances, considering economic factors such as inflation and fiscal health. Though there’s no immediate plan to merge DA with basic pay, the Commission will likely address other pressing issues regarding employee compensation.
The Commission is headed by Justice Ranjana Prakash Desai, with Pulak Ghosh serving as a part-time member and Pankaj Jain as Member-Secretary. The body is expected to submit its recommendations within 18 months of its formation, with interim reports possibly being delivered as needed.
While the merger of DA with basic pay is off the table, the 8th Pay Commission’s recommendations are still eagerly awaited. The Commission will take into account the country’s economic situation, fiscal health, and the financial pressures faced by central government employees. It will also consider how the recommended changes may affect state governments, as many states follow the guidelines issued by the Pay Commission, often with slight modifications.
Other factors, such as the current emoluments and working conditions of employees in both the public and private sectors, will also play a role in the Commission's recommendations. The government’s goal is to ensure that central government employees receive a fair compensation package that reflects the challenges posed by inflation, all while keeping the broader fiscal situation in mind.
While the Finance Ministry’s statement has clarified the merger of DA with basic pay, the bigger question remains: how will the 8th Pay Commission address the financial pressures faced by government employees? With inflation being a major concern, employees will be looking to the Commission for solutions that go beyond the issue of DA and basic pay.
Though the immediate relief that employees were hoping for through the DA merger is not on the cards, the focus will now shift to the broader changes that the Commission will propose. The government’s response has cleared one hurdle, but employees will continue to keep a close eye on what the Commission’s recommendations will mean for their pay, pensions, and allowances.
