NEW DELHI: The government may increase and merge dearness allowance (DA) with basic pay with the Union Cabinet expected to include the proposal as part of the terms of reference of the 7th pay commission.
The move will facilitate announcement of interim relief to more than 50 lakh government employees and 30 lakh pensioners by the newly-constituted pay commission before the code of conduct for the Lok Sabha polls come into force.
Central government employees unions have been demanding that besides raising DA to 100%, the government should revise the pay and merge DA with basic pay, considering market inflation and price hike of essential commodities.
As per practice, DA is merged with basic pay when it breaches the 50% mark. DA merger helps employees as their other allowances are paid as a proportion of basic pay.
An official said if merger of 50% DA with basic pay was decided, it could lead to hike in salary by around 30-35%. He added that there were instances of announcing interim relief to employees apart from DA by a newly constituted pay commission prior to their implementation.
Merger of 50% DA with basic pay was done in the 5th pay commission, but the 6th commission did not recommended it.
The Centre is expected to announce next month a hike in dearness allowance by 10% which would make it 100% of basic pay. It will be the second double digit DA hike in a row as the government had announced a hike of 10% in September last year, effective from July 1, 2013.
An official said hike in DA will not be less than 10% and would be effective from January 1 this year.