As DA likely to cross 50% next year, Govt urged to set 8th CPC

Latest Update on the 7th Pay Commission: The Railway Senior Citizens Welfare Society (RSCWS) has recently appealed to Finance Minister Nirmala Sitharaman to establish the 8th Pay Commission starting from January 1, 2024 for the central government employees and pensioners. This request is based on the anticipation that the Dearness Allowance (DA) and Dearness Relief (DR) rates will exceed 50% next year.

Also read: RSCWS urges FM to set up 8th Central Pay Commission

In a memorandum dated May 30, 2023, addressed to the Ministry of Finance, the RSCWS outlined the reasons why a new pay commission for central government employees and pensioners is necessary. Let's delve into the details of this memorandum.

The RSCWS highlighted that central government employees and pensioners have been facing financial constraints for the past 70 years due to prolonged intervals of 10 years between the Central Pay Commissions.

According to the memorandum, the 7th Central Pay Commission (CPC) submitted its report in February 2017, and the orders for its implementation were issued in July and August 2017. These orders included the provision for arrears of revised pays to be paid starting from January 1, 2016, and allowances from subsequent dates.

Furthermore, the RSCWS contended that the 7th Pay Commission had set the Minimum Pay at Rs 18,000 instead of the recommended Rs 26,000. Additionally, they deemed the proposed fitment factor of 2.57 instead of 3.15 as an "erroneous" decision.

In previous instances, the 5th and 6th Pay Commissions had recommended decoupling the pay revision from the 10-year norm and linking it to the point where the DA/DR surpasses 50%.

"As per the recommendations of the last three Central Pay Commissions, the future pay revision should be undertaken when the DA/DR reaches 50% or more than the basic pay. The pay structure requires revision to counterbalance the impact of inflation. The rate of DA/DR is projected to exceed 50% or even more from January 2024. Therefore, the Pay & Allowances and Pension need to be revised accordingly from January 2024," stated the memorandum.

The memorandum also criticized the continuous erosion of real income experienced by central government employees and pensioners. It argued that the Dearness Allowances and Dearness Reliefs fail to adequately alleviate inflationary pressures or keep up with the rise in the country's per capita income.

Additionally, the memorandum pointed out that the Pay Commissions have historically taken approximately two years to submit their reports, while the government typically takes another year or more to consider and implement the recommendations. This further diminishes the relative value of the proposed Pay & Pension.

Hence, the RSCWS requested the early establishment of the Eighth Central Pay Commission and the provision of interim relief to central government employees and pensioners starting from January 1, 2024. This relief is intended to compensate them for the erosion of their pay and pension due to inflation and the loss of relativity with the country's GDP.

The RSCWS further highlighted that India's per capita income, calculated at current prices, had more than doubled from Rs. 93,293 in 2015-16 to Rs. 1,97,000 in 2022-23 (as per the Budget Speech of the Ministry of Finance for the year 2023-24). However, the pay and pension of central government employees had only increased by 42% from January 1, 2016, to January 1, 2023, compared to a rise of 111% in the country's per capita income during the same period.

Last year, the Central Government stated that there may not be a need to establish another pay

 commission. Union Minister of State for Finance, Pankaj Chaudhary, had clarified that there was no such proposal under consideration. (Read details here)

The current DA rate for Central Government Employees stands at 42% of the basic pay. It is expected to be raised by an additional 3% of the basic pay in the near future. At this rate, it is projected that the DA/DR rate by the end of 2024 may reach around 50% or even exceed it.

Also read: RSCWS urges FM to set up 8th Central Pay Commission