7th Pay Commission: Will panel on allowances propose HRA hike of up to 178 percent?

New Delhi: The committee on allowances headed by Finance Secretary Ashok Lavasa is likely to recommend a maximum hike of 178 percent in house rent allowance by retaining HRA rate for Class X, Y and Z cities and towns at 30 percent, 20 percent and 10 percent of basic pay respectively.

The committee's proposal on allowances will benefit over 47 lakh central government employees and 53 lakh pensioners. The allowances form a sizeable amount of the salary drawn by a government employee.

As per media reports, the committee on allowances will submit its final report on Thursday (April 27), when the Finance Minister Arun Jaitley returns to the country after his visit to US and Russia. The government had earlier said that the decision on allowances will be taken after the committee on allowances submits its report.

The committee on allowances headed by Finance Secretary Ashok Lavasa that was set up to review the recommendations of the Seventh Pay Commission is understood to have finalised its report.

People familiar with the matter said the committee has also finalised its views on the pay commission recommendation of reducing the house rent allowance (HRA) to 24 percent of basic pay as against the 30 percent of basic pay employees were drawing under the Sixth Pay Commission.

The committee was also asked to examine the 7th Pay Commission recommendation for abolition of 53 allowances out of a total of 196 and subsuming another 36 into larger existing ones.

The 7th Pay Commission headed by AK Mathur had earlier proposed the rate of House Rent Allowance (HRA) at 24 percent, 16 percent and 8 percent of the Basic Pay for Class X, Y and Z cities respectively.

The Commission had also recommended that the rate of HRA will be revised to 27 percent, 18 percent and 9 percent when DA crosses 50 percent, and further revised to 30 percent, 20 percent and 10 percent when DA crosses 100 percent.

The existing rates of HRA for Class X, Y and Z cities and towns are 30 percent, 20 percent and 10 percent of Basic pay (pay in the pay band plus grade pay).

Population of City			DA above
	Present	Proposed	50%	100%
Above 50 lakh (Class X)	30%	24%	27%	30%
5 lakh to 50 lakh (Class Y)	20%	16%	18%	20%
Below 5 lakh (Class Z)	10%	8%	9%	10%

Option 1

If the committee retains the exiting HRA rates (as per 6th Pay Commission) then the HRA component of central government employees will increase ranging between 157 percent and 178 percent.

Take, for instance, a central government employee at the very bottom of the pay scale under 6th Pay Commission was till now entitled to an HRA of Rs 2,100 on basic pay of Rs 7,000 (basic pay that includes pay of pay band + grade pay) in a Class X city. It is to be noted that government, while implementing the 7th Pay Commission in June last year had made it clear that till the final outcome of allowances committee is being placed, the employees would be getting the allowances as per 6th Pay Commission.

Now, as per 7th Pay Commission, the new entry level pay at this level is Rs 18,000 per month against which the new HRA for a Class X city would be Rs 5,400 per month, that is around 157 percent more than the existing level.

Existing Basic Pay (6th CPC)	HRA (6th CPC)			Proposed Entry Pay as per 7th CPC	Proposed HRA as per 7th CPC
	Class X	Class  Y	Class Z		Class X	Class Y	Class Z
7000	2100	1400	700	18000	5400	3600	1800
13500	4050	2700	1350	35400	10620	7080	3540
21000	6300	4200	2100	56100	16830	11220	5610
46100	13830	9220	4610	118500	35550	23700	11850
90000	27000	18000	9000	250000	75000	50000	25000

Similarly, at the highest level of the pay scale, the Cabinet Secretary and officers of the same rank have a basic pay of Rs 90,000, which means they are entitled to current HRA of Rs 27,000 in Class X towns. After the revised pay scale, the new basic pay is Rs 2.5 lakh, for which the HRA would be Rs 75,000, meaning a hike of around 178 percent.

Option II

If the Committee accepts the bare recommendations of A K Mathur-led 7th Pay Commission then the HRA component of central government employees will increase ranging between 106 percent and 122 percent.

Take, for instance, a central government employee at the very bottom of the pay scale, where the basic pay (pay of pay band + grade pay) is now Rs 7,000, would currently be entitled to an HRA of Rs 2,100 in a Class X city. As per 7th Pay Commission, the new entry level pay at this level is Rs 18,000 per month against which the new HRA for a Class X city would be Rs 4,320 per month, that is 106 percent more than the existing level.

Existing Basic Pay (6th CPC)	HRA (6th CPC)			Proposed Entry Pay as per 7th CPC	Proposed HRA as per 7th CPC
	Class X	Class  Y	Class Z		Class X	Class Y	Class Z
7000	2100	1400	700	18000	4320	2880	1440
13500	4050	2700	1350	35400	8496	5664	2832
21000	6300	4200	2100	56100	13464	8976	4488
46100	13830	9220	4610	118500	28440	18960	9480
90000	27000	18000	9000	250000	60000	40000	20000

Similarly, at the highest level of the pay scale, the Cabinet Secretary and officers of the same rank have a basic pay of Rs 90,000, which means they are entitled to current HRA of Rs 27,000 in Class X towns. After the revised pay scale, the new basic pay is Rs 2.5 lakh, for which the HRA would be Rs 60,000, meaning a hike of 122 percent.