After careful consideration, the finance ministry appears to have rejected the proposal of merging 50 per cent of dearness allowance with basic salary of government employees and setting up of the Sixth Pay Commission.
However, the centre is likely to clear the 4 per cent hike in DA ahead of the Lok Sabha elections, official sources said on Wednesday.
The proposed DA hike and the merger of 50 per cent of the DA with basic would have resulted in rise in gross salaries by about 10 per cent and would cost the exchequer more than Rs 1,000-1,500 crore (Rs 10-15 billion) during 2003-04, sources said.
But as DA of government employees is normally hiked in January and July every year, the centre is likely to clear the proposal of hiking it from 59 to 63 per cent.
The Fifth Pay Commission had recommended that DA should be merged with basic after it crosses the 50 per cent mark.
The finance ministry had considered this, but sources said this would mean about 10 per cent rise in the gross salaries of government employees.
Sources also said there was no proposal for setting up another Pay Commission.