The government had in June accepted the recommendation of Justice AK Mathur-headed Seventh Pay Commission in respect of the hike in basic pay and pension but its suggestions relating to allowances were referred to the committee. The Seventh Pay Commission had examined a total of 196 existing allowances and, by way of rationalisation, recommended abolition of 51 allowances and subsuming of 37 allowances.
The committee on allowances was initially given a time of four months to submit its report to the finance minister. Till a final decision is taken, all existing allowances are being paid at the Sixth Pay Commission rates.
The Seventh Pay Commission had recommended that HRA be paid at the rate of 24 per cent, 16 per cent and 8 per cent of the new Basic Pay, depending on type of cities.
The Seventh Pay Commission had also recommended that the rate of HRA be revised to 27 per cent, 18 per cent and 9 per cent respectively when DA crosses 50 per cent, and further revised to 30 per cent, 20 per cent and 10 per cent when DA crosses 100 per cent.
Allowances form a significant chunk of government employees' salary. Some analysts had earlier said that implementation of the housing allowance portion of the Seventh Pay Commission as well as GST or Goods and Services Tax could push up average inflation.
"At worst, if the government is under pressure, this allowance can be pushed to the next year, as was done in the previous pay commissions. The housing allowance does not attract arrears," HSBC Securities had said in an earlier report.
The Cabinet had also decided to constitute two separate committees to suggest measures for streamlining the implementation of National Pension System (NPS) and to look into anomalies likely to arise out of implementation of the Commission's Report.