Allowances related to Housing : House Rent Allowance (HRA) : Presently, HRA is payable at the following rates:
There
are a large number of demands for paying HRA as a percentage of (Basic
Pay + DA), instead of as a percentage of Basic Pay alone, as at present.
Representations have also been received regarding enhancement of
percentage rates and having only two classifications of Metros and
Non-metros (instead of the present classification of X, Y and Z cities).
PBORs of uniformed forces have
vehemently argued for doing away with the concept of Authorized Married
Establishment and the requirement of a minimum age of 25 years for
grant of Compensation in Lieu of Quarters (CILQ).
Analysis and Recommendations: Compensation towards the housing needs of Central Government employees is covered in three ways:
1. As a component of Basic Pay when it is initially fixed (based upon the Aykroyd formula)
2. As a constituent of Dearness Allowance [the AICPI(IW), on which the DA is currently based includes a weight of 15.27% towards housing], and
3. In the form of House Rent Allowance
In view of the fact that the DA
calculation methodology that is being followed does include a certain
weightage for housing, the demand to pay HRA as a percentage of Basic
Pay + DA is not justified.
To arrive at the appropriate rates of
HRA, the Commission used a two-fold approach: (i) It compared the rise
in housing compensation with the cost of housing in major X, Y and
Z category cities over the period 2006 to 2013, and (ii) It compared, de
novo, the HRA after the rise in Basic Pay proposed with representative
house rents in major X, Y and Z category cities.
For (i) above, the table of comparison (for a hypothetical employee whose Basic Pay was Rs.1000 in 2006) is given below:
As is clear from the above table,
compensation for housing in 2013 was 1.79 times that in 2006 for Class X
cities, 2.07 times for Class Y cities and 2.92 times for Class Z
cities.
During the same period, the weighted (by
population of cities) average rise31 in housing index for Class X
cities was 1.69 times, for thirty most populated Class Y cities it was
2.10 times, and for twenty-five most populated Class Z cities it was
also 2.10 times.
Thus, it can be safely concluded that
the rise in housing compensation has largely kept pace with the rise in
rental values in all categories of cities.
However, if a zero-based comparison of
HRA with house rents is carried out the Commission observed that today
there are websites that give a good idea of the prevalent house rents in
various cities. From the information available on the websites, it was
observed that with the increase in Basic Pay proposed (and consequent
rise in HRA with the rationalized percentages), most of the employees
will be able to afford a rented house as per their
entitlement.
The Commission also took note of the
link between increase in HRA and increase in house rent. There was a
sharp rise in the index from the first half of 2009,
immediately following VI CPC recommendations. The All India House Rent
Index32 chart given below demonstrates this:
Considering all these factors, and in
line with our general policy of rationalizing the percentage based
allowances by a factor of 0.8, the Commission recommends that HRA should
be rationalized to 24 percent, 16 percent and 8 percent of the Basic
Pay for Class X, Y and Z cities respectively.
However, the Commission also recognizes
that with the current formulation, once the new pay levels are
implemented, the compensation towards HRA will remain unchanged until
such time as the pay and allowances are next revised. Going by
the historical trend this event is likely to be a decade away. Some
representations have been received stating that towards the later part
of the ten year period the HRA compensation falls considerably short of
the requirement. Having regard to this, the Commission also recommends
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.
Currently, in the case of those drawing
either NPA or MSP or both, HRA is being paid as a percentage of Basic
Pay+NPA or Basic Pay+MSP or Basic Pay+NPA+MSP respectively. HRA is a
compensation for expenses in connection with the rent of the
residential accommodation to be hired/leased by the employee and is
graded based on the level of the employee, and therefore should be
calculated as a percentage of Basic Pay only. Add-ons like NPA, MSP,
etc. should not be included while working out HRA.
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