7th Pay Commission: Cabinet decision on central government employees' allowances likely this week

The anticipation of central government employees waiting for an update on allowance recommendations by the 7th Pay Commission might come to an end this week. The Union Cabinet, chaired by Prime Minister Narendra Modi, is likely to decide on the changes in allowance structure when it meets on Wednesday this week.

The suggestions regarding reforms in allowances were handed over by the Empowered Committee of Secretaries (E-CoS) to Finance Minister Arun Jaitley last week. He is expected to table these proposals before the Cabinet which were drafted after deliberating over recommendations by Committee of Allowances on June 1.

The E-CoS meeting on June 1 saw discussion over House Rent Allowances (HRA) and increase in basic pay among other things. The Empowered Committee capped HRA rates between 25 per cent and 27 per cent of the basic pay. Central government employees have been demanding 30 per cent, 20 per cent and 10 per cent.

The pay panel had recommended that HRA rates to be pegged at 24 per cent, 16 per cent and 8 per cent of the basic pay and further revised to 27 per cent, 18 per cent and 9 per cent if dearness allowance crosses 50 per cent. HRA rates were suggested to be further revised to 30 per cent, 20 per cent and 10 per cent if DA went beyond 100 per cent of basic pay for Class X,Y and Z cities respectively. The Cabinet may even look into the HRA rates demanded by the central government employees.

The Committee of Allowances was formed by the Union Cabinet last year in August under Finance Secretary Ashok Lavasa to look into the extensive changes in allowance structure recommended by the 7th Central Pay Commission. The Commission had suggested 52 allowances out of 196 allowances to be done away entirely, while 36 others to be subsumed under other allowances.

Considering the representations from various central government department and agencies, the Lavasa Committee submitted its report to Jaitley on April 27. After being examined by Department of Expenditure, the recommendations were forwarded to Empowered Committee for screening and consolidations.
The Cabinet has already approved revision of pension to pre-2016 pensioner and family pensioners, benefitting 55 lakh former central government employees and army veterans. The Cabinet also agreed to retain the percentage-based regime of disability pension for defence pensioners, instead of the slab-based criteria recommended in the 7th Pay Commission. Central government employees, however, were receiving allowances on old rates due to delays in finalising allowance rates.

Dissatisfied with the pay hike recommended by the pay panel, the central government employees are waiting for something good news to come of Cabinet's decision on allowances.

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