Pay Commission is set up by Government of India, and gives its recommendations regarding changes in salary structure of its employees. Since India's Independence, seven pay commissions have been set up on a regular basis to review and make recommendations on the work and pay structure of all civil and military divisions of the Government of India. Headquartered in Delhi, the Commission is given 18 months from date of its constitution to make its recommendations.
The first pay commission was established on January, 1946 and it submitted its report in May, 1947 to the interim government of India. It was under the chairmanship of Srinivasa Varadachariar. The mandate of 1st (nine members) was to examining and recommending emolument structure of Civilian employees.
Post War Pay Committee for the armed Forces
Armed forces emoluments structure was determined not by the 1st Central Pay Commission(CPC) but by a Departmental Committee which had service members. The task of this committee was to make recommendations "in the structure of emoluments and benefits of service personnel in the light of the recommendations made by the pay commission for civilian employees".:para 5, Chapter 48 :p 95-96 The First Pay Committee, set up after the 1st pay Commission, was called "The Post War Pay Committee for the armed Forces". The New Pay Code effective from 1 July 1947 was based on the recommendations of this Committee. The pensionary benefits were examined by separate committee called " Armed Forces Pension Revision Committee (1949-50)".
The second pay commission was set up in August 1957, 10 years after independence and it gave its report after two years. The recommendations of the second pay commission had a financial impact of INR 39.6 crore. The chairman of the second pay commission was Jagannath Das. The second pay commission reiterated the principle on which the salaries have to be determined. It stated that the pay structure and the working conditions of the government employee should be crafted in a way so as to ensure efficient functioning of the system by recruiting persons with a minimum qualification.
The Departmental Pay Committee, set up after the 2nd pay Commission, was called, the Raghuramiah Committee(1960), which had service representatives. It examined armed forces emoluments and made recommendations .:para 5, Chapter 48
The third pay commission set up in April 1970 gave its report in March 1973 i.e. it took almost 3 years to submit the report, and created proposals that cost the government INR 144 crore. The chairman was Raghubir Dayal. The third pay commission (3CPC) added three very important concepts of inclusiveness, comprehensibility, and adequacy for pay structure to be sound in nature. The third pay commission went beyond the idea of minimum subsistence that was adopted by the first pay commission. The commission report says that the true test which the government should adopt is to know whether the services are attractive and it retains the people it needs and if these persons are satisfied by that they are getting paid.
The 3CPC was the first Pay Commission without military member. Its "Terms of Reference" however included "examination of the structure of emoluments, the retirement benefits and terms and conditions of the Defence Forces personnel".:para 2.3.5 The Commission, established 'relativity' of Defence Forces officers and IPS officers, whose wages till for similar years of service were less than that of Armed Forces officers with similar years of service, noted that "the relativity" with IPS was "only a working method of devising scales of pay for the service officers which did not mean that the functional role of the two services were similar". The Commission, ambiguously "qualified this statement by mentioning that the job profile of IPS officers was the closest civilian analogue vis-à-vis infantry officers and that 'a working relationship did exist between the two organizations'". While establishing some sort of parity, and relativity with IPS, the Commission, without an explanation, noted "that the pay structure of the Indian Administrative Service with its long pay scales was particularly unsuitable for service officers", even though the pay structures of armed forces and Indian Civil Service had been, as a matter of established practice, at par.:para 2.3.5
It controversially recommended that military pension be de-linked from military service conditions to conform to civil pensions. On the basis of the 3 CPC recommendations Indira Gandhi, Prime Minister in the Indian National Congress(INC) government, took an "ex-parte" decision and terminated One Rank, One Pension (OROP), the basis of military pensions till then.:para 2 and 10.2 :p 1
In 1973, the Government, implemented the following changes in pension and service conditions of the Armed Forces:  Increased the pension of civilians, who retired at 58, by 20 percent, from 30 to 50 percent;  reduced the pension of soldier, Non Commissioned Officers (NCOs), and Junior commissioned Officers (JCOs), by 20 percent, from 70 to 50 percent of basic pay, with the caveat that for full pension the minimum service was 33 years;  an exception was made for the armed forces, the mandatory service for full pension was reduced to 25 year. But as soldiers in 1973 retired after 15 years service, at the age of 33-36, they got less than 30 percent of the pay as pension;  soldiers pension was thus decreased not by 20 percent but 40 percent from 70 to 30 percent. The government in addition to down grading military pensions down graded the status of soldier by equating "infantry soldier with less than three years' service" with a "semi-skilled/unskilled labour". These decisions were based on the recommendation, and endorsement of K B Lall, Defence Secretary. The decision was announced two months after Field Marshal Sam Manekshaw, the victor of the 1971 war, retired from service. The reason for depressing the armed Forces pensions given by the government was to ensure 'equivalence' of Armed Forces pensions with civilians.
The reduction in armed Forces pension, and down grading its status immediately following the decisive Bangladesh war, was, not unexpectedly, unpopular with the armed Forces, and has since become a cause of persistent grievance, and distrust. Conflating civil and military pensions, and reduction of Armed forces Pension, by the Indira Gandhi Government, has been invoked to rally Armed Forces Veterans, most recently during the OROP protests.:para 2 and 10.2 
Constituted in June 1983, its report was given in three phases within four years and the financial burden to the government was INR 1282 crore. This commission has been set up on dated 18.3.1987, Gazette of India (Extra ordinary) Notification No 91 dated 18.3.1987, The chairman of fourth pay commission was P N Singhal.
Indian National Congress (I) Government, headed by Rajiv Gandhi, in the wake of the 4th CPC to implemented concept of 'Rank Pay' for armed forces officer. Rank Pay affected all officers ranks from second lieutenant to brigadier in the army, and equivalent ranks in the Indian Air Force and the Indian Navy. The 'rank pay', which varied from 200 to 1200, was not an additional pay, but amount deducted from their pay grade. This ended long established err Military Indian Police service equations. Police Officers, and officers from other AIS officers, with 14 years of service, who were formerly in the same pay grade as majors, with 14 years service, were equated to Brigadiers, on the basis of the new pay grades. Maj General Satbir Singh an expert on Police- military rank structures and pay grades, called rank pay, "rarest of rare fraud, perjury and Injustice to the defence forces".
He explained, "How could it be allowed that the first military rank of Second Lieutenant along with two promotional ranks of Lieutenant and Captain were all clubbed with the first civilian rank?". Similarly at the level of major "rank pay' had the effect of promoting civilian pay grades equal to major till the 3 CPC, to that of Colonels." The rank pay became an issue of considerable resentment in the armed forces, and cause of general distrust of the pay commissions, and the Congress I Government. Eventually, Maj AK Dhanapalan, a retired major, litigates 'rank Pay'. After protracted legal struggle high court, despite many appeals, in a landmark decision declares the 'rank pay' concept illegal. In its judgment the SC notes that the 'rank pay' was wrongly deducted from basic pay and ordered re-fixation of pay "with effect from" and not "as on" 1 January 1986.
The notification for setting up the Fifth CPC was issued on 9 April 1994, but started functioning only on 2 May 1994, with the assumption of charge by the Member Secretary.:paras 1.63 The chairman of fifth pay commission was Justice S. Ratnavel Pandian. the members were: Suresh Tendulkar, Professor Delhi school of Economics; and M.K Kaw, Indian Administrative Service. In comparison, First CPC had nine members including military members, the second had six members including a military member, the 3 CPC and 4 CPC had five, but no military member. The fifth had three members, but no military member.:para 1.11 The first had no member secretary, just a secretary. After the 1 CPC all pay commissions have had a member secretary, and invariably from the IAS.:para 1.12
The 5 CPC report, a massive tome, had nine part in 172 chapters. It took three years with a sanctioned staff 107, which ballooned to 141, to prepare the report.:page13 By way of comparison, 4 CPC took 209 bureaucrat Accounts Service, Indian Revenue Service, Indian Economic Service, Central Secretariat Service, Border Security Force, Geological Survey of India, Central Public Works Department and National Informatics Centre.:paras 1.63 It cost INR 17,000 crore.
Part VI of report dealt with pensions and retirement benefits for civilian; Part VII dealt with pay scales and allowances of Armed Forces personnel. Part IX is the concluding part of the Report.:page13
With the implementation of the Fifth Pay commission a huge burden was taken up by the central government. It declared hike in salary of about 3.3 million central government employees. Further, it also insisted on pay revision at the state government level. The Fifth pay commission disturbed the financial situation of both the Central and the State Governments and led to a hue and cry after its implementation. The Central government's wage bill before the implementation of the commission's recommendations was 218.85 billion in 1996-1997 which also included pension dues, and by 1999 it shot up by about 99% and the burden on the exchequer was about to INR 43,568 crore in 1999-2000. With regard to the state government the bill went up by 74%. The state governments which paid about Rs 515.48 billion in 1997 as salaries, had to pay Rs 898.13 billion in 1999 as salaries. This clearly indicates the burden on the state and the central government. Many economists[who?] say that about 90% of the revenue of the state went in as salaries[verification needed]. 13 states of India were not in a position to pay salaries to its employees due to the hike and hence the central government's help was sought.
One of its recommendations was to slash government workforce by about 30%. It also recommended to reduce the number of pay scale from 51 to 34 and to not recruit to about 3,50,000 vacant position in the government. None of these recommendations were implemented.
The World Bank criticized the Fifth Pay Commission, stating that the Fifth Pay Commission is the 'single largest adverse shock' to the public finance of the nation. It also said that the number of employees of the government was 'not unduly' large, but there was a 'pronounced imbalance' in the skills. It noted that about 93% of the employees were of 3rd or 4th grade.
The 4CPC, for unknown reasons, had no separate TORs for the Armed Forces. The 5 CPC, however, for the first time was asked to examine the terms and conditions of the Armed Forces, and make suggestions for what is "considered desirable and feasible".:para 1.2 Thus, the pay commission noted ambiguously that "even their recommendations with regard to changes in the structure of emoluments including death cum gratuity in respect of Armed Forces Personnel had to be made with due regard to the terms and conditions of their service" :para 1.2
The 5 CPC, in its report submitted in January 1997, recommended increase in posts for Armed Forces personnel in Group C and D in Central Armed Police Forces (CAPFs) from 10 to 25percent. For Short Service Commissioned Officers, on completion of their military service, 5 CPC recommended earmarking 25 percent officer's post in the CAPFs. These recommendationsby the pay Commission were intended to reduce the defence pension bill; save on training and recruitment costs; provide trained manpower to government departments; and provide soldiers a second career after their term of military engagement.:p 139, para 2.4.4
These recommendations of the Pay Commission were, however, mostly ignored by the Janata Dal (United Front), and BJP Government of Atal Bihari Vajpayee that followed. Mulayam Singh Yadav, Defence Minister (1 June 1996 - 19 March 1998), Indrajit Gupta (Communist Party of India-United Front), Home Minister (29 June 1996 - 19 March 1998), and L K Advani (BJP), Home Minister (19 March 1998 - 22 May 2004) did little to implement these recommendations. The problem festered, and the pension bill ballooned.:p 139, para 2.4.4
In July 2006, the Cabinet approved setting up of the sixth pay commission. This commission has been set up under Justice B.N.Srikrishna with a timeframe of 18 months. The cost of hikes in salaries is anticipated to be about INR 20,000 crore for a total of 5.5 million government employees as per media speculation on the 6th Pay Commission, the report of which is expected to be handed over in late March/early April 2008. The employees had threatened to go on a nationwide strike if the government failed to hike their salaries. Reasons for the demand of hikes include rising inflation and rising pay in the private sector due to the forces of Globalization. The Class 1 officers in India are grossly underpaid with an IAS officer with 25 years of work experience earning just Rs.55,000 as his take home pay. Pay arrears are due from January 2006 till September 2008. Almost all the Government employees received 40% of the pay arrears in 2008 and balance 60% arrears (as promised by Government) has also been credited in Government employees account in 2009. The Sixth Pay Commission mainly focused on removing ambiguity in respect of various pay scales and mainly focused on reducing number of pay scales and bring the idea of pay bands. It recommended for removal of Group-D cadre.
The Government of India has initiated the process to constitute the 7th Central Pay Commission along with finalisation of its Terms of Reference, the composition and the possible timeframe for submission of its Report. On 25 September 2013 then Finance Minister P Chidambaram announced that Prime Minister Manmohan Singh has approved the constitution of the 7th Pay Commission. Its recommendations are likely to be implemented with effect from 1 January 2016. Justice A.K Mathur will be heading the Seventh Pay Commission, announcement of which was done on 4 February 2014. On 29 June 2016, Government accepted the recommendation of 7th Pay Commission Report with meager increase in salary of 14% after six month of intense evaluation and successive discussion.
|Name||Designation||Role in Commission|
|Ashok Kumar Mathur||Retired Judge, Supreme Court and Retired Chairman, Armed Forces Tribunal||Chairman|
|Vivek Rae||Retd. Secretary, Ministry of Petroleum and Natural Gas||Member (Full Time)|
|Dr. Rathin Roy||Director, NIPFP||Member (Part Time)|
|Meena Agarwal||OSD, Department of Expenditure, Ministry of Finance||Secretary|
In May 2014, a group of retired government officials, challenged the inclusion of a senior IAS officer in the three member 7th Pay Commission, in the Delhi High Court. They alleged that this would lead an inherent bias in the commission's recommendations towards IAS officers.
On 9 November 2017, the government raised the maximum amount that a central government employee can borrow from the government to Rs 25 lakh for new construction/purchase of new house/flat
Earlier this limit was only Rs 7.50 lakh. This move is going to benefit about 50 lakh central government employees all over India.
The employee can borrow up to 34 months of the basic pay to a maximum of Rs 25 lakh, or cost of the house/flat, or the amount according to repaying capacity, whichever is the least.
If both spouses are central government employees, they can take Housing Building Advance (HBA) either jointly, or separately. Also, the rate of Interest on HBA will be only 8.50% at simple interest.
The chief justice and other supreme court and high court judges got a threefold salary hike in the sixth pay commission however the trial court judges were paid low and a bench comprising Chief Justice K G Balakrishnan and Justices P Sathasivam and J M Panchal constituted a new pay commission for the trial court judges headed by retired Madras High Court judge, Justice E Padmanabhan for recommendation of revision of about 14000 trial court judges. This order from the SC came because of a petition filed by All India Judges Association, which stated that the first judicial commission which was headed by Justice Jagannatha Shetty said that there should be an upward revision of salaries of lower court judges in proportion to the hike to the judges of high court and Supreme Court. It also sought direction from the court to the centre for setting up a committee "forthwith appoint a committee of one or more persons to look into the matter" relating the salary of officers in the lower judiciary.
On 19 November 2015, the 7th Central Pay Commission recommended 23.55% hike in pay and allowances which will be implemented from 1 January 2016. The full report is available on the website of Ministry of Finance, Government of India
The Union Cabinet approves 7th Pay panel recommendations on 29 June 2016. The recommendations will be effected from 1 January 2016 with arrears to be paid in the financial year 2016-17 itself unlike previously, when arrears were paid in the following financial year. Also this time, employees will had to wait only 6 months for the CPC's recommendations to be implemented as compared to 19 months for the 5th CPC and 32 months for the 6th  except for autonomous organizations like CSIR, ICAR, ICMR etc. under various ministries.
The recommendation of the 7CPC affecting the armed forces are a cause of profound unease and resentment in the Armed Forces, especially, 7CPC recommendation on separate 'Pay Matrices', and allowance system for the armed forces and defence civilians, and police, and other civil servants. While 7CPC provides for mandated timescale promotions to Defence civilians from audit and account services, police, and other officers at regular intervals of 4, 9, 13, 14, and 16 years of service; it does not do so for the armed forces officers. The orders implemented by the government on the basis of 7 CPC recommendation, despite armed forces advise and concerns, make time scale police officers and defence civilians with lesser service and experience, senior to armed forces officers, and potentially in command of armed forces officers of equal or senior ranks. For instance, Wing Commanders of the Air Force, commander of the navy, and Lt colonel of the army, with 13 years of service, according to MOD implementation tables, will be subordinate in 'level', rank, pay scale, and organizational hierarchy than police officers, auditors and accountants, with equal or even lesser service. MOD implementation order has created an invidious situation for armed forces officers when serving alongside defence civilians and police officer. According to the MOD orders, a police officer and Defence Accounts officer with 14 years service will be at higher level than the naval officer in command of INS Vikramaditya, India's Aircraft carrier, a highly selective rank and appointment, with some 20 years of service.
In March 2016, eighteen former heads of the Armed forces, including General Ved Prakash Malik (former Chief of Army Staff) and Admiral Arun Prakash (former Chief of naval staff) sent a joint letter to Narendra Modi, the Prime Minister, conveying their distress and alarm on the flawed approach and contentious recommendations of the 7CPC. The representations by former Chiefs and the Chiefs of Staff to the MOD, the PM and other bureaucratic bodies reviewing the 7CPC recommendations were in vain. On 25 July 2016, without addressing or taking into account the key concerns of the armed forces, the Government issued instructions implementing 7CPC's "general recommendations on pay without any material alteration" including separate "Pay Matrices" (for civilians) and the armed forces.