Government on Wednesday decided to merge 50 per cent industrial dearness allowance with the basic pay of employees of profit-making central public sector enterprises, raising their allowances and retirement benefits.

"The proposal would benefit employees following Industrial Dearness Allowance pattern of pay scales in CPSEs which are in a position to absorb the additional expenditure without budgetary support," Information and Broadcasting Minister Priya Ranjan Dasmunsi told reporters after a Cabinet meeting.

The proposal for IDA merger with basic pay will apply to CPSE functionaries at board level, below board level executives and non-unionised supervisors with effect from January 1, 2007.

"In case of unionised workmen, the Board (of the CPSEs) may take a decision after negotiation with the union," Dasmunsi said.

The scheme, he added, will also apply to the employees of the Food Corporation of India.

As per the scheme, 50 per cent IDA will be distinctly shown as Dearness Pay and will be counted for purposes like payment of allowances, transfer grant, retirement benefits, contribution to provident fund, licence fee etc.

However, entitlements such as LTC, TA/DA on tour and transfer will be based on basic pay without taking into account the dearness pay, he said.