Govt to soon set up 7th Pay Commission for employees, pensioners

The government today announced the decision to set up the Seventh Pay Commission for central government employees and pensioners, in yet another move to influence voters ahead of the assembly elections in 5 states in November and the general elections due next year.

"Prime Minister Manmohan Singh approved the constitution of the 7th Pay Commission. Its recommendations are likely to be implemented with effect from 1 January 2016", finance minister P Chidambaram said in a statement.

The setting up of the commission, whose recommendations will benefit about 50 lakh central government employees, including those in defence and railways, and about 30 lakh pensioners, comes days after the government hiked the dearness allowance rate to employees and pensioners to 90 per cent.

The composition as well as the terms of reference of the 7th Pay Commission will be finalised and announced shortly after consultation with major stakeholders, Chidambaram said,

The Pay Commission is set up every 10 years to revise the pay scales of its employees and often these are adopted by states after some modification.

Chidambaram said the commission takes about two years to prepare its recommendations and the 7th Pay commission recommendations are also expected in two years. The award of the commission is likely to be implemented from 1 January 2016, he added.

The sixth Pay Commission was implemented from January 1, 2006, fifth from January 1, 1996 and fourth from January 1, 1986, according to an official release.

The announcement on setting up a new panel to revise pay scales comes close on the heels of two successive revisions in the dearness allowance rates for government employees and pensioners – from 78 per cent to 80 per cent and subsequently to 90 per cent within in a one month span.

The increase in DA to 90 per cent would result in an immediate burden of Rs6,297 crore on exchequer during 2013-14 and additional annual expenditures.