Government Clarifies DA-DR Merger Status Ahead of 8th Pay Commission — No Plan to Add Allowance to Basic Salary Yet

As discussions surrounding the implementation of the 8th Pay Commission intensify, the Central government has issued a clear statement on one of the most frequently raised demands by employees and pensioners — merging Dearness Allowance (DA) and Dearness Relief (DR) with the basic salary. The government has clarified that, at present, no proposal to merge DA-DR with basic pay is under consideration. This update is significant as it sets the tone for future pay structure reforms and shifts the focus towards the fitment factor, which is expected to play the most crucial role in the upcoming pay revision.

Minister of State for Finance Pankaj Chaudhary informed the Lok Sabha through a written reply that the government has not taken up any proposal to merge DA into basic pay, contrary to speculation. This statement brings temporary closure to the long-standing demand from employee unions to merge at least 50% of DA into basic salary before the rollout of the next Pay Commission.

Rising Inflation and Employee Concerns

The question regarding DA and DR integration was raised by MP Anand Bhadauria, who pointed out that inflation has consistently outpaced salary growth over the past several decades, leaving employees with limited real income relief. Worker unions have repeatedly argued that while DA revision offers partial protection against price rise, merging it with basic pay would strengthen their long-term financial stability. This demand grew stronger after initial discussions regarding the framework of the 8th Pay Commission emerged in early November.

However, such a move requires balancing economic feasibility with fiscal discipline. The government must evaluate expenditure pressures, particularly in an election year when fiscal deficit targets are already defined. Any major wage restructuring impacts not only employees but also exchequer liability, pension payouts, and annual allowance revisions.

Fitment Factor Becomes the Key Focus for 8th CPC

While DA-DR merger has been ruled out for now, attention has shifted toward the fitment factor, the most influential component in determining the new salary structure. According to taxation and finance experts cited in a Moneycontrol report, the government is likely to take a cautious approach and avoid interim relief decisions without full commission recommendations.

The fitment factor acts as a multiplier applied to the current basic salary to derive the revised pay. As this multiplier increases, basic salary rises automatically, along with HRA, TA, and other linked allowances. Pensioners also benefit directly, since pension equals 50% of the revised basic pay.

• At present, the fitment factor under the 7th Pay Commission is 2.57.

• If raised to 3.0, as demanded by several employee groups, entry-level salary could increase by 15–20% or more.

However, since DA continues to stand separate from basic salary, future DA hikes will not compound the basic pay amount — meaning benefits from DA increments will remain monetory additions rather than structural salary upgrades.

What Happens After the 7th Pay Commission Term Ends?

The tenure of the 7th Central Pay Commission ends on December 31, raising concerns among employees about whether DA-DR revisions might pause during the transition phase. The Centre has confirmed that DA and DR will continue to be revised every six months, even between pay commissions, to protect wage value from inflation.

The allowance calculation will remain based on the AICPI-IW (All India Consumer Price Index for Industrial Workers). As long as this index reflects rising inflation, DA and DR will keep increasing periodically — though without contributing to basic salary unless a future policy change is made.

Bottom Line

The government’s latest clarification means employees may not see DA-DR integration anytime soon, but anticipation around the 8th Pay Commission remains high. With the fitment factor expected to steer the new pay matrix, central employees and pensioners now wait to see how much salary revision the 8th CPC will recommend, and how soon it will be implemented.