8th Pay Commission: Allowances included in 8th CPC TOR, how the 7th CPC dealt with them?

The Union Minister of State for Finance, Pankaj Chaudhary, recently confirmed in the Rajya Sabha that the 8th Central Pay Commission (CPC) will recommend on allowances as well as salary, pension and other pay-related issues of the central government employees.

"The Eighth CPC will make its recommendations on the various issues viz. Pay" Allowances, Pension, etc. of the Central Government employees," Chaudhary said.

Allowances are a sum of money paid to the employee for a specific purpose. The employer may also put restrictions to ensure that the money is spent only for the intended purpose. This ensures that allowances do not become a source of profit for the recipients.

"To examine and recommend changes that are desirable and feasible in the emoluments including pay, allowances, and other facilities/ benefits, in cash or kind, having regard to rationalization, contemporary functional and the specialized needs of various Departments, agencies and services...," the TOR says.

What happened in the 7th CPC?

From the above, it is clear that the 8th Pay Commission will look into the current allowances provided to employees. However, it would be interesting to see if it retains the existing allowances or trims them further.

The 7th Pay Commission had examined scores of allowances paid to employees. It noted: "The number of allowances paid to government employees in India is quite large, and there are demands for even more allowances. The trend worldwide, however, is otherwise–to include most of the additional items of remuneration as part of the Basic Pay and minimize the number of allowances."

"The Commission, in its recommendations, has tried to reconcile both the points of view, keeping the unique conditions of our country in mind," the 7th CPC said.

The 7th CPC also recommended separate budgeting for allowances. "In the present system of accounting, Pay and Allowances are clubbed and it is difficult to bifurcate them. Hence, it is recommended that a separate object head for budgeting and accounting should be used to record the expenditure on allowance," it said.

"The Commission has recommended abolishing 52 allowances altogether. Another 36 allowances have been abolished as separate identities, but subsumed either in an existing allowance or in newly proposed allowances. Allowances relating to Risk and Hardship will be governed by the proposed Risk and Hardship Matrix," the 7th CPC said.