NEW DELHI: The central government has clarified that it is not considering any proposal to merge dearness allowance (DA) or dearness relief (DR) with the basic pay of central government employees and pensioners.In a written reply to the Lok Sabha on Monday, minister of state for finance Pankaj Chaudhary said, “No proposal regarding merger of the existing Dearness Allowance with the Basic Pay is under consideration with the Government at present.” The statement further stated that the government periodically revises DA/DR every six months to offset inflation.“In order to adjust the cost of living and to protect Basic Pay/Pension from erosion in real value on account of inflation, the rates of DA/DR are revised periodically every 6 months on the basis of All India Consumer Price Index for Industrial Workers (AICPI-IW) released by Labour Bureau, Ministry of Labour and Employment,” it added.The clarification comes amid growing demands from employee unions seeking an immediate merger of 50% DA with basic pay to offset rising inflation.

8th Pay Commission

The finance ministry also confirmed that the government has issued a notification dated November 3, 2025, formally constituting the Eighth Central Pay Commission (8th CPC).Prime Minister Narendra Modi-led Cabinet has granted approval for the Terms of Reference governing the 8th Central Pay Commission last week.This commission will assess and establish new pay structures and post-retirement benefits for central government staff and pensioners. The commission’s comprehensive review is expected to require between 12 to 18 months to complete and submit its findings. It will revise salaries of around 50 lakh central government employees and pensions of nearly 65 lakh pensioners.

What next?

The 8th Pay Commission will now begin its work, expected to run until mid-2027. The commission will submit its report in 18 months and interim reports as and when they are finalised. If approved on schedule, revised salaries and pensions are expected to take effect from January 1, 2026, increasing take-home pay and pension payouts for central government staff and retirees.