Cabinet approves 3% DA hike for central government employees
What's the story
The Union Cabinet on Thursday approved a 3% hike in dearness allowance (DA) and dearness relief (DR) for central government employees and pensioners. The latest hike is over the existing rate of 28% of the basic pay/pension. The decision was taken during a Union Cabinet meeting chaired by Prime Minister Narendra Modi earlier in the day. Here are more details.
Context
Why does it matter?
The hike in Dearness Allowance just ahead of Diwali will leave central government employees with more expendable income. DA is a fixed percentage of the basic salary. The allowance helps hedge the impact of inflation. This is the fourth hike in DA for central government employees since 2020. Earlier, it was increased in January 2020, June 2020, and January 2021.
Announcement
Over 1 crore employees, pensioners to benefit
The DA hike will benefit about 47.14 lakh central government employees and 68.62 lakh pensioners, Union Minister for Information and Broadcasting Anurag Singh Thakur announced at a press briefing. The latest hike will cost the government exchequer an additional Rs. 9,488.70 crore per annum, he said. The new DA and DR rates will be effective from July 1, 2021.
Rates
Government approved pending DA, DR hikes this July
In July, the Centre had approved the pending DA and DR hike for central government employees and pensioners. At that time, the government had increased the DA and DR rates from 17% to 28%. This hike had come into effect from July 1 and cost the government an additional Rs. 34,400 crore. After the latest hike, the DA percentage would be 31%.
Information
DA hiked multiple times since January 2020
The Centre had announced a 4% increase in DA allowances in January 2020. By June, another 3% was hiked, which was again increased by 4% this January. However, the Centre had stalled its implementation due to the COVID-19 situation.
History
Centre had stopped DA, DR benefits last year
Owing to a revenue shortfall induced by the outbreak of COVID-19, the central government had stopped the DA and DR benefits of central government employees. "In view of the unprecedented situation that arose due to the COVID-19 pandemic, three additional installments of dearness allowance to central government employees and dearness relief to pensioners were frozen," Thakur, the then-junior Finance Minister, had said.
Information
How to check salary growth post-hike?
DA is calculated at a specific percentage of the basic salary of an employee. This is then added to the basic salary along with other components of the pay. To know the salary after the hike, one has to add the new DA percentage and other allowances to the current basic pay. The current basic pay is decided as per the 7th Pay Commission.