FNPO secretary general Sivaji Vesireddy wrote that considering rising inflation and a delay in the implementation of the 8th Pay Commission, employees and pensioners should be provided with interim relief in the form of the merger of 50% DA with basic pay.
“FNPO recommends to the government the merger of 50% dearness allowance with basic pay/pension with effect from 01.01.2026 as a measure of interim relief. This measure would provide immediate financial relief, restore partial purchasing power, and ensure economic dignity to lakhs of employees and pensioners across the country,” writes FNPO in its letter to 8th CPC Chairperson.
Vesireddy told ET Wealth Online that DA has been merged with basic pay in previous pay commissions. “In the 3rd Pay Commission, DA was merged when it crossed 100% of the basic pay. In the 4th and 5th Pay Commissions, the concept of dearness pay was introduced when DA rose significantly,” says Vesireddy.
Past instances of DA merger (As per FNPO)
| Pay Commission |
Year | DA / Dearness Pay decision | Impact |
| 4th CPC | 1986 | DA had risen significantly and the Dearness Pay (DP) concept was introduced. Part of DA was merged with Basic Pay. | Merged DA was used for calculating retirement benefits. |
| 5th CPC | 1996 | DA levels became very high. 50% DA was merged as Dearness Pay (DP) in 2004 when DA crossed 50%. | DP was treated as part of Basic Pay for pension and allowances. |
| 6th CPC | 2006 | Separate Dearness Pay system was discontinued. | Earlier merged DA became part of the revised Pay Band + Grade Pay structure. |
The current DA and dearness relief (DR), which is given to pensioners, stand at 58% each with a 2% rise expected soon.
DA/DR is given to government employees and pensioners to neutralise the impact of price rise, based on the All India Consumer Price Index Industrial Workers (AICPI-IW). The government revises DA twice a year in July and January.
While the government has said that there would be no merger of DA with basic pay, many employee bodies have long been demanding the merger of DA with basic pay to provide interim relief to over 1 crore employees and pensioners.
The government in November asked the 8th Pay Commission to submit its recommendation report in the next 18 months. Because of this delay, employees bodies want the government to merge DA with basic pay.
Why does FNPO want DA merger with basic pay?
FNPO writes over the years, DA is directly linked to the cost of living, and its steep rise reflects the continuous erosion of real wages.
Reasons FNPO provided for justification of DA merger, include-
Erosion of real wages
FNPO writes sustained inflation over the past several years has substantially reduced the purchasing power of employees.
“Essential commodities and services have witnessed consistent price escalation, placing heavy financial stress on employees and pensioners,” the letter reads.
Principle adopted in earlier Pay Commissions
FNPO says historically, whenever DA crossed 50%, it was considered right to merge a portion of DA with basic pay to neutralise inflation impact and to provide structural correction in pay.
Impact on allowances and retirement benefits
FNPO writes since several allowances and retirement benefits are calculated on basic pay, the non-merger of DA leads to stagnation in actual financial improvement. Merger of 50% DA would:
Enhance house rent allowance, transport allowance, and other pay-linked benefits.
Improve pension, gratuity, and other retirement benefits.
Provide long-term financial stability to employees and pensioners.
Interim relief pending final recommendations
FNPO says the constitution of the 8th CPC and the time required for submission and implementation of its recommendations may take considerable time.
“During this period, employees continue to face severe inflationary pressures. Therefore, merger of 50% DA with basic pay may kindly be considered as an interim relief measure, subject to final adjustment based on the 8th CPC recommendations,” writes FNPO.
