Winter Session: Centre Rules Out DA-Basic Pay Merger Even as 8th Pay Commission Terms Move Forward

The Central Government has categorically ruled out any immediate merger of Dearness Allowance (DA) with basic pay for its employees, dashing hopes of an interim salary boost ahead of the Eighth Pay Commission’s recommendations. In a written reply tabled in the Lok Sabha on Monday, Minister of State for Finance Pankaj Chaudhary stated, “No proposal regarding the merger of the existing dearness allowance with the basic pay is under consideration with the government at present.” The clarification comes amid persistent demands from employee unions for the automatic merger of 50% DA with basic pay—a practice last followed under the Sixth Pay Commission in 2006 when DA crossed the 50% threshold.

DA, currently at 55% of basic pay (as of July 2025), is revised twice yearly based on the All India Consumer Price Index for Industrial Workers to offset inflation and protect real income. A merger would permanently increase basic salary, leading to higher future allowances and pension benefits. Unions had hoped for such relief before the Eighth Pay Commission submits its report, arguing that the next revision cycle is still over a year away. The government, however, maintained that periodic DA hikes already serve the purpose of compensating for rising living costs.

The statement follows the Union Cabinet’s approval of the Terms of Reference (ToR) for the Eighth Central Pay Commission on October 28, 2025. Headed by former Supreme Court judge Justice Ranjana Prakash Desai, the panel has been tasked with reviewing salary structures, allowances, pensions, and service conditions for nearly 50 lakh central government employees and over 65 lakh pensioners. The Commission is expected to submit its recommendations within 18 months, with implementation likely from January 1, 2026—though the final effective date will be decided post-submission.

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Historically, pay commissions are constituted every decade, with the Seventh Pay Commission implemented in 2016 after a fitment factor of 2.57. While speculation about a higher fitment factor (3.0 or above) has already begun circulating among employee forums, the government has remained tight-lipped on specifics. The ToR emphasises rationalisation of allowances, performance-linked incentives, and gender-neutral family pension norms, indicating a broader overhaul beyond mere salary hikes.

With the DA merger off the table for now, employees will continue to receive biannual relief through incremental DA increases, the next due in January 2026 based on July–December 2025 inflation data. Unions have expressed disappointment but welcomed the formal constitution of the Eighth Pay Commission as a step forward, vowing to press their demands during stakeholder consultations.

As the winter session progresses, the government’s firm stance signals fiscal caution amid competing priorities like infrastructure spending and welfare schemes, leaving central staff reliant on the commission’s final report for a comprehensive salary restructuring in the coming years.

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