The 5th Pay Commission recommended that when the Consumer Price Index increased by 50 per cent compared with the base index, Dearness Allowance should be converted into Dearness Pay. It also suggested that this Dearness Pay should be taken into account for all purposes, including retirement-related benefits.
In addition, the commission recommended that employees at all pay levels should receive 100 per cent compensation for inflation through Dearness Allowance.
The 6th Pay Commission, however, rejected the proposal to merge Dearness Allowance with basic salary at any level. According to the commission, the revised pay structure already provided a mechanism for periodically revising allowances and benefits in response to changes in prices.
Consequently, the existing arrangement of reviewing Dearness Allowance twice a year was retained instead of conducting reviews every three months.
The 7th Pay Commission also recommended retaining the existing formula for calculating Dearness Allowance. According to the commission, the formula had proved effective over several years. It therefore did not recommend any major or fundamental changes to the overall mechanism or calculation formula for DA.
With the 8th Pay Commission now in focus, employee and pensioner organisations have put forward several demands concerning DA, basic salary and Dearness Relief (DR).
The Federation of National Postal Organisations (FNPO) has demanded that Dearness Allowance should be merged with basic salary once it exceeds 25 per cent.
Meanwhile, the Bharat Pensioners Samaj has called for the review of Dearness Allowance and Dearness Relief provided to pensioners every three months instead of twice a year.
Another proposal calls for Dearness Relief to be incorporated into basic pension once it crosses a specified threshold. A detailed analysis and review of the methodology used to calculate the All India Consumer Price Index for Industrial Workers (AICPI-IW) has also been suggested.
The 8th Pay Commission will have to consider these demands and recommendations while formulating its decisions on DA, basic salary and pension-related benefits. Its forthcoming recommendations are being closely watched by government employees and pensioners, particularly over whether the existing rules for calculating and merging inflation-linked benefits will be revised.
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