DA, DR for central government employees, pensioners hiked by 3%
In a major relief for central government employees, the Union Cabinet has approved the proposal to hike the dearness allowance (DA) by 3%. The government also increased the Dearness Relief (DR) given to the pensioners by 3%. After the hike, the DA and DR will become 34% of the basic pay from the earlier 31%, effective January 1, 2022.
Why does this story matter?
The hike comes as a huge relief for over 50 lakh government employees and 65 lakh pensioners amid rising inflation and sky-high fuel prices. Significantly, the increase comes at a time when retail inflation in February climbed to an eight-month high of 6.07%. The revision in DA was on hold for over one-and-half years due to the COVID-19 pandemic.
Decision taken after CCEA meeting
The decision to release an additional installment of DA and DR was taken after a meeting of the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi on Wednesday. "This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission," a statement from the Cabinet read.
Hike to cost exchequer Rs 9,544.50 crore per annum more
"The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be Rs 9,544.50 crore per annum. This will benefit about 47.68 lakh central Government employees and 68.62 lakh pensioners," the statement added.
Centre hiked DA by 11% in July last year
In July last year, the Centre had approved the pending DA and DR hike for central government employees and pensioners, increasing the DA and DR rates from 17% to 28%. Later in October, the government hiked the DA and DR again by 3%, taking it to 31% from the existing rate of 28% of the basic pay/pension.
What is dearness allowance?
The dearness allowance is a component of the salary of government employees aimed at providing relief from inflation. It is revised twice annually—in January and July. DA is divided into industrial dearness allowance (IDA) and variable dearness allowance (VDA). The IDA depends on the Consumer Price Index and is applicable for the public sector employees, while the VDA is applicable for central government employees.
How to calculate DA?
In 2006, the government revised the formula to calculate the DA. For the central government employees: Dearness Allowance % = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 12 months -115.76)/115.76)*100. For Central public sector employees: Dearness Allowance % = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 3 months -126.33)/126.33)*100.
