8th Pay Commission: Govt shared important update on DA-basic pay merger. Check details

The central government has officially notified the formation of the 8th Central Pay Commission (CPC), marking the beginning of a crucial process that will impact the salaries and pensions of over 11 million central government employees and pensioners. However, contrary to expectations from various employee unions, the Centre has ruled out any proposal to merge the current dearness allowance (DA) or dearness relief (DR) with basic pay.

In a written response in Parliament on December 1, Union Minister of State for Finance Pankaj Chaudhary confirmed that the 8th CPC has been constituted through a resolution dated November 3, 2025. “There is no proposal under consideration to merge the dearness allowance or dearness relief with basic pay,” he clarified.

Currently, DA for employees and DR for pensioners stand at 55% of the basic salary or pension, respectively, following a 3% hike announced in October ahead of Diwali. While the DA/DR is revised biannually based on the All India Consumer Price Index for Industrial Workers (AICPI-IW), employee federations have been pressing for more responsive mechanisms, including merging DA with basic pay to mitigate the impact of high inflation.

Despite those demands, the government appears committed to the current structure of periodic adjustments, rather than a one-time merger.

A wider mandate, but questions linger

The 8th Pay Commission, headed by Justice (Retd.) Ranjana Desai, will review and recommend changes to pay structures, allowances, pensions, and other benefits across a wide set of government roles — including Central Government employees, Defence forces, All India Services (AIS) officers, and judiciary staff in Union Territories. The Commission is expected to submit its recommendations within 18 months, and may issue interim suggestions during the process.

However, several employee unions have raised concerns about the Terms of Reference (ToR), especially the omission of an implementation timeline and the alleged exclusion of nearly 69 lakh pensioners from the Commission’s scope.

The 8th CPC was announced in January 2025, but formal appointments and ToR were finalised only in October — a delay that has already cast doubts on whether the recommendations can be implemented by 2026, the expected year based on the 10-year pay revision cycle.

Expectations vs reality

The pressure for merging DA with basic pay stems from rising living costs. Employee bodies argue that the six-month lag in DA revisions does not reflect real-time inflation, leading to an erosion of disposable income. A merger, they say, would provide a more immediate and sustainable cushion against price volatility.

Yet, the Centre's latest clarification suggests that the government is not inclined to alter the current model, at least for now. This has disappointed many who had hoped for interim relief ahead of the full implementation of the 8th CPC.