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7th Pay Commission – DA, HRA and CCA proposed by JCM

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

Dearness allowance.

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

Download Detailed Memorandum dated 30.06.2014 submitted by National Council Staff Side JCM to 7th Pay Commission