The Centre on Wednesday increased the dearness allowance to 28 per cent, an increase of 11 percentage points over the existing rate of 17 per cent of the basic pay, in a relief to central government employees and pensioners.
The revised dearness allowance (DA) and dearness relief (DR) from July 1, 2021, will benefit about 48.34 lakh central employees and 65.26 lakh pensioners.
The government had frozen all such hikes because of the strain on its revenues in light of the Covid-19 crisis. The instalments due from January 1 and July 1, 2020, and January 1, 2021, had also been frozen.
“Cabinet approves restoring of three instalments of Dearness Allowance and Dearness Relief with effect from 01.07.2021 representing an increase of 11 per cent over the existing rate of 17 per cent of the Basic Pay/Pension. No arrears for the period from 01.01.2020 till 30.06.2021 shall be paid,” the Press Information Bureau tweeted.
After a cabinet meeting, information and broadcasting minister Anurag Thakur said the increase in the DA and DR would result in an additional annual burden of Rs 34,401 crore for the exchequer.
The step will offer respite to government employees, especially with rising inflation. The government said that the increase reflected the additional instalments that were earlier frozen.
“The rate of Dearness Allowance/Dearness Relief for the period January 1, 2020, to June 30, 2021, shall remain at 17 per cent,” an official release said.
“Our demand for arrears has not been accepted by the government so far. We will continue to press for it. Inflation has spiked and the government continues to earn large sums from increased duties on petrol and diesel. Why should the poor employees suffer?” R.N. Parashar, secretary-general, Confederation of Central Government Employees, told The Telegraph.
Amid the pandemic and the ensuing lockdowns in April last year, the finance ministry had decided to put on hold increments in DA for over 48 lakh central government employees and over 60 lakh pensioners till July 2021.
Economists said the additional sum could act as a stimulant to boost demand. The additional money could spur spending in consumer durables at a time the economy is recovering after the second wave of the pandemic and could prop up the government’s tax collections as well.
This increase is in accordance with the accepted formula based on the recommendations of the 7th Central Pay Commission.
The DA/DR is paid to central government employees/pensioners to adjust the cost of living and to protect their basic pay/pension from erosion in the real value. These are revised twice a year from January 1 and July 1.
Dearness allowance is part of an employee’s salary. It is calculated as a percentage of the basic salary and transport allowance. This amount is then added along with house rent allowance to get the total salary. The hike in DA/DR is according to the agreed methodology of taking the average of the Consumer Price Index for industrial workers for the past 12 months.
