ADVERTISEMENT

Seventh Pay Panel: Cabinet Approves Higher Allowances

The revised allowances will benefit at least 47 lakh employees.

An employee of Muthoot Finance Ltd., one of India’s leading providers of gold-based loans, counts Indian one hundred rupee banknotes. (Photographer: Anindito Mukherjee/Bloomberg)
An employee of Muthoot Finance Ltd., one of India’s leading providers of gold-based loans, counts Indian one hundred rupee banknotes. (Photographer: Anindito Mukherjee/Bloomberg)

The Cabinet on Wednesday approved higher allowances for central government employees based on the Seventh Pay Commission recommendations.

The pay panel’s suggestions were cleared with 34 modifications. The increased allowances, which come into effect from July 1, will cost the government Rs 30,748 crore. They will benefit at least 48 lakh central government employees.

“The government has shown a great deal of fiscal prudence and at the same time addressed the genuine concerns of the employees and responded to some of the administrative exigencies necessitating the modifications,” said a Press Information Bureau statement.

The Seventh Pay Commission had estimated an additional financial implication of Rs 29,300 crore on account of allowances, which was Rs 1,448.23 crore lower than what approved by the Cabinet on Wednesday.

HRA Revision

The Cabinet has approved keeping the house rent allowance of employees at 27 percent, 18 percent and 9 percent of the basic pay based on three categories of cities. These rates will apply to those employees whose dearness allowance crosses 25 percent of their basic salary.

Seventh Pay Panel: Cabinet Approves Higher Allowances

The HRA will rise to 30 percent, 20 percent and 10 percent when the dearness allowance crosses 50 percent of the basic salary.

Seventh Pay Panel: Cabinet Approves Higher Allowances

Cities are classified into three categories – tier I, II and III – based on their population.

  1. Tier I: Cities with population of 50 lakh and above
  2. Tier II: Cities with population of 5 to 50 lakh
  3. Tier III: Cities with population below 5 lakh

Employees residing in a Tier I city will receive the highest HRA, while those residing in Tier III will get the lowest approved allowance. This will benefit employees who do not reside in a government accommodation.

As of now, the existing rates of HRA for Tier I, II and III cities and towns are 30 percent, 20 percent and 10 percent of an employee’s basic pay.

A committee headed by Finance Secretary Ashok Lavasa had examined the Seventh Pay Commission’s recommendations on allowances in April and suggested modifications in some allowances applicable universally to all employees and also for those in specific categories, including railways and defence. The committee was set up after protests from employees that the revision suggested by the Seventh Pay Commission was not adequate. Key among the demands was a revision in the HRA.

After the report was submitted the report to Finance Minister Arun Jaitley, an Empowered Committee of Secretaries was formed to examine it and give proposals to the Cabinet.