The Union Cabinet approved a two percent increase in the Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) for pensioners, effective from January 1.
An official statement reveals that the decision will benefit approximately 48.66 lakh Central Government employees and 66.55 lakh pensioners.
Financial Impact On Government Exchequer
The increase in both DA and DR will have a combined impact of Rs 6,614.04 crore annually on the government’s finances.
This revision marks one of the two biannual hikes in DA and DR, which the government typically announces in March and October, with the latter usually coinciding with Diwali.
DA Hike Aligned With Inflation Rates
The expected 2 percent increase in DA aligns with inflation rates based on the consumer price index for industrial workers.
This year, inflation has eased compared to last year, when the government raised the DA by 3 percent in October and 4 percent in March.
After the 3 percent increase in October last year, DA had risen to 53 percent of the basic pay. With the new 2 percent hike, DA now stands at 55 percent of basic pay.
8th Pay Commission To Revise Wages And Allowances
In January this year, the Centre approved the formation of the 8th Pay Commission, tasked with revising the wages and allowances for Central Government employees.
The government is expected to formally constitute the commission soon, which will include the appointment of a chairman and at least two members.
While the government will continue to revise DA and DR biannually, it is likely that this increase will be the last before the 8th Pay Commission begins its discussions with various stakeholders.
Employee forums have also urged the government to merge the DA and DR components with the basic salary before the commission implements its report.
Previous Pay Commissions And DA Merger Rule
Under the 5th Pay Commission, the government integrated DA with basic pay once DA crossed 50 percent.
The government carried out this merger in 2004. However, this practice was discontinued under the 6th and 7th Pay Commissions.
This latest DA increase, alongside the expected developments with the 8th Pay Commission, marks a significant step in revising the wages and allowances of Central Government employees and pensioners.
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