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7th Pay Commission – Dearness Allowance (DA), House Rent Allowance (HRA) and Compensatory City allowance (CCA), proposed by National Council, Staff Side, JCM in the Memorandum submitted to 7th CPC
The neutralisation envisaged under the present computation of dearness compensation is supposed to be cent per cent, but in reality it is not the case. Actual consumer price index is much higher than the level at which DA is calculated on the basis of 12 monthly average. The average is always lower than the actual cost of living.
The calculation of consumer price index, its basis, the basket of goods on which it is based, are questionable and has become a matter of dispute. Since the Pay Commission being not the forum at which these issues could be taken, we do not propose to go into the details of this aspects.
We suggest, therefore, that the existing formula of computation of DA and its payment with effect from 1st January, and 1st July, may continue.
House Rent allowance.
|Population criteria||classification||Rate as a % of pay + Grade
Pay + MSP +NPA
|50 lakhs and above||X||30%|
|50 to 5 lakhs||Y||20%|
|Below 5 lakhs||Z||10%|
The present scheme of HRA is based on the recommendation of the 6th CPC, which is as follows:
We reproduce hereunder the recommendation made by the third Central Pay Commission in the matter of grant of house rent allowance. (Para 29 Part I. Vol. IV.Chapter 56), which would be the best if implemented even today.
“While we find it difficult to accept the kind of parity suggested above, we are aware of the acute problem caused by the lack of adequate government housing and by the inadequate government housing and by the inadequacy of the existing rates of house rent allowance and recommend as follows:-
(i) Government should take houses on long lease and make residential accommodation available to its employees on payment of 10% of their pay.
(ii) Government should lay down appropriate house rent allowance rates in different cities and towns based not on population criteria, but on an actual assessment of the prevailing levels of rent in different cities and towns. Alternatively, certain notional rents for different types of accommodation meant for officers and personnel of specified pay groups should be laid down for particular cities after studying the actual conditions in that city. The difference between the actual rent paid and 10% of pay should be reimbursed subject to a maximum of the difference between the notional rent and 10% of the pay. The existing norms in regard to entitlement of accommodation, size of rooms etc. could, if necessary, be reduced depending on the housing situation and the norms usually adopted by different income groups in renting accommodation in the various cities. Such notional rents should, to start with, be applied to all stations falling under the description of classified cities for purposes of House Rent Allowance, Additions could also be made to the list later on by including other cities deserving similar treatment.
(iii) Till the Government is able to make arrangements recommended in the preceding sub-
paragraphs, the rates of HRA should be as follows:”
|Class of city/town||Rate of HRA|
|A, B-1 and B-2||15% of pay subject to a maximum amount of Rs.400 as
house rent allowance.
|C class||7 ½ % of pay subject to a maximum amount of Rs.200 as house rent allowance|
The above said recommendation is still to be acted upon by the Government and the transitory provisions suggested by them i.e. payment of allowances at a pre-determined rate on the basis of classification made of the cities depending upon the population continue to be employed. The non-implementation of the above recommendation of the third CPC , has without exception, gone to depress the wage of all sections of Central Government employees as they are perforce to spend more than what they receive as HRA for obtaining and retaining the accommodation The rates prescribed by the 6th CPC, though an improvement over its predecessor Commission, it has not improved the situation. The real estate value throughout the country has skyrocketed and owning an accommodation within the city/Municipal limit has become impossible for Government employees. There is not a single town/village where the real estate boom has remained unaffected. The phenomenal increase in the value of land has naturally impacted the rent, one is to pay on leasing house/flat. The house rent allowance does not bear even a small percentage of the rent. The 7th CPC may recommend to the Government to act upon the suggestion made by the 3rd CPC without any further delay. Pending action on the part of the Government, the Commission may suggest the following rates of House Rent allowance;
|X classified cities||60%|
|Y classified towns||40%|
|Z classified/unclassified places||20%|
Compensatory City allowance.
The Compensatory City allowance has been granted to Central Government employees since the First Central Pay Commission. This allowance was sanctioned to compensate for the high cost of living in bigger cities classified as such for grant of house rent allowance. Upto 3rd CPC it used to be certain percentage of pay for difference pay ranges and different classified towns. The 4th and 5th CPC, however, recommended lump sum amounts being paid as CCA. 5th CPC in para 106.10 (Pge 1582) of their report has commented that
“We also do not support the demand for making CCA a percentage of basic pay because this amounts to admitting a firm and casual relationship between CCA and income.”
When it is admitted that CCA is essentially an allowance given to offset the imperfection in Dearness allowance as a measure of relative expensiveness of classified Cities, it really becomes an additional DA.When the DA is at a percentage of Pay, how can CCA not be fixed as a percentage of pay. The basis on which the lumpsum amount of CCA was recommended by the 4th and 5th CPCs had also not been disclosed and therefore, it appears to be an arbitrary decision.
The 6th CPC on the other hand recognised that the only two factors viz. accommodation and transportation contribute to high cost of living in classified towns. They, recommended the revised HRA and Transport allowance to adequately compensate for relative expensiveness of the classified cities. In view of that contention, they stated that the CCA stands subsumed in Transport allowance. We are unable to agree with the idea of subsuming CCA in Transport allowance recommended by the 6th CPC on the consideration that the relative expensiveness in bigger cities is not only on account of problems of accommodation and transportation. There are various other factors due to which the expensiveness of a particular city either increases or decreases. CCA was a component in determination of overtime allowance prior to the 6th CPC recommendations were implemented. By allowing this to be subsumed in the transport allowance, it became difficult to factor the CCA component in the computation of over time allowance.
For these reasons, we propose the Commission to recommend the following rates of City Compensatory allowance:
|Pay Range||X classified city||Y classified towns.|
|Pay upto Rs. 50,000||10% of pay||5% of pay|
|Pay of more than Rs. 50000||6% of pay subj\ect to a minimum of Rs. 5000||3% of pay subject to a minmum of Rs. 2500|
As the relative expensiveness affects middle class employees more severely we have provided higher rates of CCA for those in the pay range upto Rs. 50,000. We have not proposed grant of DA on this allowance.
Check also other proposals submitted to 7th Pay Commission by National Council, Staff Side, JCM
- Staff Side of JCM urges 7th Pay Commission to conduct meeting
- Interim report of 7th Pay Commission – Statement of Minister
- Highlights of the Memorandum by JCM to 7th Pay Commission
- JCM proposal on CL, Earned Leave, Half Pay Leave, Child Care Leave, and LTC
- Proposal on Appointment on Compassionate Grounds submitted by NC, JCM to 7th CPC
- Five Promotions under MACP – JCM proposes to 7th Pay Commission
- 7th Pay Commission – Housing facilities and House Building Advance proposed by JCM
- Children Education Allowance, OT and Travelling Allowance proposed by JCM to 7th CPC
- 7th Pay Commission – DA, HRA and CCA proposed by JCM
- Fitment Formula, Fixation of Pay on promotion and Date of effect of 7th CPC Pay – JCM Memorandum
- Proposed Pay Structure by National Council, Staff Side, JCM