Beginning this month more than 4.8 million central government employees will start getting higher pay and allowances, including 106 per cent to 157 per cent hike in house rent allowance (HRA), after the union cabinet chaired by Prime Minister Narendra Modi last week approved the recommendations of the 7th CPC on allowances with some modifications.
While approving the recommendations of the 7th CPC on 29 June 2016, the cabinet had decided to set up a Committee on Allowances (Coal) in view of substantial changes in the existing provisions and a number of representations received.
The modifications are based on suggestions made by the CoA in its report submitted to finance minister on 27 April 2017 and the Empowered Committee of Secretaries set up to screen the recommendations of the 7th CPC.
"HRA is currently paid at the rate of 30 percent for `X' (population of 5 million and above), 20 per cent for `Y' (5 lakh to 5 million) and 10 per cent for `Z' (below 5 lakh) category of cities. The 7th CPC has recommended reduction in the existing rates to 24 per cent for `X', 16 per cent for `Y' and 8 per cent for `Z' category of cities," the government said in a statement.
"As the HRA at the reduced rates may not be sufficient for employees falling in lower pay bracket, it has been decided that HRA shall not be less than Rs5,400, Rs3,600 and Rs1,800 for X, Y and Z category of cities, respectively. This floor rate has been calculated at the rate of 30 per cent, 20 per cent and 10 per cent of the minimum pay of Rs18,000. This will benefit more than 7.5 lakh employees belonging to Levels 1 to 3," it added.
"7th CPC had also recommended that HRA rates will be revised upwards in two phases to 27 per cent, 18 per cent and 9 per cent when DA crosses 50 per cent and to 30 per cent, 20 percent and 10 percent when DA crosses 100 per cent. Keeping in view the current inflation trends, the government has decided that these rates will be revised upwards when DA crosses 25 per cent and 50 per cent, respectively. This will benefit all employees who do not reside in government accommodation and get HRA," it said.
The HRA component of central government employees will increase ranging between 122 per cent and 157 per cent.
Accordingly, a central government employee at the very bottom of the pay scale, where the basic pay (pay of pay band + grade pay) is now Rs7,000, would currently be entitled to an HRA of Rs2,100 in a Class X city. As per 7th Pay commission, the new entry level pay at this level is Rs18,000 per month against which the new HRA for a Class X city would be Rs5,400 per month, that is 157 per cent more than the existing level.
Similarly, at the highest level of the pay scale, the cabinet secretary and officers of the same rank have a basic pay of Rs90,000, which means they are entitled to current HRA of Rs27,000 in Class X towns. After the revised pay scale, the new basic pay is Rs2.5 lakh, for which the HRA would be Rs60,000, meaning a hike of 122 per cent.
Meanwhile, the union cabinet has decided not to abolish 12 of the 53 allowances which were recommended to be abolished by the 7th CPC.
"The decision to retain these allowances has been taken keeping in view the specific functional requirements of Railways, Posts and Scientific Departments such as Space and Atomic Energy. It has also been decided that 3 of the 37 allowances recommended to be subsumed by the 7th CPC will continue as separate identities. This has been done on account of the unique nature of these allowances," as per the government statement.
"The rates of these allowances have also been enhanced as per the formula adopted by the 7th CPC. This will benefit over one lakh employees belonging to specific categories in Railways, Posts, Defence and Scientific Departments," it said.