After the OROP announcement at the budget the UPA government is likely to ask the seventh central pay commission to merge 50% dearness allowance with basic pay of the employees.

This is likely to be the part of the terms of reference (ToR) for the commission, to be considered by the Cabinet this week. The Commission may suggest interim relief as well.

The hikes will be all the more appealing as the Centre is expected to increase the dearness allowance by 10% to 100% by the end of February.  Earlier in 5th pay commission, the DA was merged with the basic pay when the DA  crossed 50%. 

Assuming an employee gets Rs 100 as basic pay and Rs 100 as DA at present, the basic will rise to Rs 150, even if 50% allowance is merged. The remaining part of the DA will be calculated on this new basic

A higher basic pay will also impact the house rent allowance (HRA) of employees as it is calculated at 30% of the basic pay for central government employees. This will effectively become 45%

Earlier this month, the government had constituted the Pay Commission under the chairmanship of former Supreme Court Judge Ashok Kumar Mathur. The other members are Petroleum Secretary Vivek Rae (full-time member), National Institute of Public Finance and Policy Director Rathin Roy (part-time member) and Officer on Special Duty in the Expenditure Department Meena Agarwal (Secretary).

The Commission’s recommendations would be implemented from January 1, 2016, officials said. However, it may recommend interim relief as well, they added. .

The recommendations of the Commission, will directly benefit almost 50 lakh employees and 30 lakh pensioners. Employees of states governments which will adopt the recommendations of the 7th Pay Commission will also benefit.