House Rent Allowance (HRA) : Report of the Committee on Allowances
House Rent Allowance (HRA) (Para 8.7.3-16)
Existing Provisions: HRA is paid @30, 20 and 10 percent for X
class (50 Lakh & above), Y class (5 to 50 lakh) and Z class (below 5
lakh) cities respectively.
At present, in the case of those drawing either NPA or MSP or both, HRA
is being paid as a percentage of BP+NPA or BP+MSP or BP+NPA+MSP
respectively.
Recommendations of 7th CPC: It has been retained and rationalized. After
applying a multiplication factor of 0.8, the rates have been revised
downwards to 24 percent, 16 percent and 8 percent of the Basic Pay for
X, Y and Z class cities, respectively.
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. Add-ons like NPA,
MSP, etc. should not be included while working out HRA.
Demands:
I. National Council (Staff Side), JCM: HRA may be retained @30%, 20%
and 10% for X, Y and Z cities respectively as the Commission has taken
unreliable statistics to determine HRA, which has been reduced by a
multiplication factor of 0.8 to 24%, 16% and 8% for X, Y and Z cities
respectively.
II. CAG, Civil Aviation, M/o Health & FW, M/o HRD – D/o of Higher
Education, MEA, Coal, DAE, DRDO, Dep. Of Space, CVC: Retain the
allowance at the existing rates.
III. M/o of Law & Justice- D/o Justice: Cities having population of more than 1 crore may be granted HRA @ 30%.
Analysis and Recommendations of the Committee: The Committee has the
following observations on the recommendations of the 7th CPC on HRA:
(I) HRA rates have been revised downwards by applying the multiplication
factor of 0.8 applied by the 7th CPC on all percentage- based
allowances. This was done to neutralise the significant increase in the
Basic Pay. All fixed allowances have only been given an inflation
indexed increase by the 7th CPC. While the 7th CPC has not explicitly
stated how the multiplication factor of 0.8 has been arrived at anywhere
in the Report, it may be seen that factoring in the expected Dearness
Allowance of 125% on 01.01. 2016 would have yielded a multiplication
factor of 0.875 which may have been rounded off to 0.8.
(II) On the 7th CPC recommendation that the rate of HRA will be revised
to 27%, 18% and 9% when DA crosses 50 percent and further revised to
30%, 20% & 10% when DA crosses 100%, the Committee is of the view
that given the inflation rates since January 2016 and the RBI policy on
inflation, the DA rates might not go beyond 50% in the next 10 years.
(III) While the rents for residential accommodation have not gone up
significantly in the recent past and might also have fallen in some
areas, the HRA at the rates recommended by the 7th CPC at the lower
levels might not continue to be adequate as per the prevailing market
rent.
In view of these observations, the Committee has deliberated upon the
following three options which separately, or in combination, can be
suggested by way of modifications to the 7th CPC recommendations:
Option (i): Having regard to submissions made before it stating
that towards the later part of the ten year period, HRA compensation
falls considerably short of requirement, the 7th CPC has 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. However,
considering the present inflation rate, the rate of increase of the
Dearness Allowance and future inflation projections, it appears unlikely
that DA rates will reach 100 % in the ten year period. Taking this into
consideration, the Committee considered that the timing of the upward
revisions in HRA rates proposed by the 7th CPC may be advanced as under:
This would have no immediate financial implication and the 1st revision,
as per the current trend of increase in DA, is expected to occur in
July, 2018. Accordingly, additional annual financial implication in
July, 2018 will be approximately ₹1850 crore. The additional financial
implication in the second, third and fourth revision will also be
approximately ₹1850 crore per annum.
Option (ii): Instead of advancing the full restoration of HRA
rates, the Committee considered splitting the revisions proposed by 7th
CPC as under:
The financial implication would be similar as in Option (i) except that the timing of the revision would undergo a change.
Option (iii): It has been pointed out that at the recommended rates, HRA
at the minimum level might not be sufficient. The minimum HRA
calculated at the entry level of Level 1for X, Y and Z category cities
at the rates recommended by the 7th CPC will be ₹4320, ₹2880 and ₹1440
respectively. The Committee considered recommending that the HRA at the
rates recommended by the 7th CPC may be subject to a floor which may be
fixed at ₹5400, ₹3600 and ₹1800 per month, calculated at 30%, 20% and
10% of the minimum pay for X, Y and Z category cities respectively. This
will benefit employees in Levels 1, 2 and 3.
The additional financial implication is estimated to be ₹ 385.00 crore
and around 7.70 lakh employees shall be benefited. After a detailed
consideration of the above options, the Committee recommended that
either only option (iii) or option (iii) in combination with option (ii)
be accepted. A final decision in this regard may be taken by E-CoS.
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