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The Union Cabinet on Tuesday approved the terms of reference (ToR) for the Eighth Central Pay Commission (CPC), marking the formal beginning of the process that will determine salary revisions for over 50 lakh Central government employees and 70 lakh pensioners across the country. The new Pay Commission will be chaired by Justice Ranjana Prakash Desai, former Supreme Court judge and current chairperson of the Press Council of India, and is expected to submit its report within 18 months from the date of its constitution. Panel composition Alongside Justice Desai, the Commission will include Professor Pulak Ghosh, a faculty member at the Indian Institute of Management (IIM) Bangalore, as Member (Part-Time), and Pankaj Jain, Secretary, Ministry of Petroleum and Natural Gas, as Member-Secretary. According to the government notification, the Eighth CPC will examine the structure of pay, allowances, and pension for Central government employees and pensioners, taking into account economic conditions, inflation trends, fiscal sustainability, and future recruitment needs. Mandate of the Eighth Pay Commission The ToR approved by the Cabinet lays down the broad framework for the Commission’s work. It includes reviewing: The pay structure and grade pay of Central government employees. Pensionary benefits for retired employees. Allowances and incentives, including cost-of-living adjustments. Parity and rationalisation of pay structures among various categories of government staff. The Commission is also expected to recommend measures to improve efficiency, accountability, and motivation within the public sector workforce while maintaining fiscal prudence. Background: What to expect The Seventh Central Pay Commission, constituted in February 2014 under the chairmanship of Justice A.K. Mathur, had recommended an average 23.55% hike in pay and allowances for Central government employees. Those recommendations were implemented in January 2016, effective retrospectively from January 2016. Typically, a new Pay Commission is constituted every 10 years. The formation of the Eighth CPC aligns with that schedule, with recommendations likely to come into effect around January 2026, coinciding with the next pay cycle. Officials said the approval of the ToR is a crucial procedural step that enables the Commission to begin consultations with ministries, employee associations, and other stakeholders. Employee expectations and fiscal considerations Government employee unions have been pressing for the early setting up of the Commission, citing rising living costs and stagnant dearness allowance (DA) adjustments relative to inflation. However, economists have pointed out that any significant hike in pay and pensions could have a fiscal impact running into several lakh crore rupees, depending on the Commission’s recommendations and the government’s decision on implementation. The Finance Ministry is expected to balance employee welfare with fiscal responsibility, especially as India prepares its Union Budget 2026 in an environment of global economic uncertainty. With the ToR approved, the Commission will begin its work immediately, inviting representations from various employee federations, state governments, and the public sector. Its final recommendations will be submitted to the Union government within 18 months, after which the Cabinet will review and decide on implementation timelines. The outcome of the Eighth Pay Commission’s recommendations is expected to shape the compensation structure of the Indian government workforce for the next decade.
