Cabinet approves 4% DA hike for central government employees
In a significant move for central government employees, the Union Cabinet has approved the proposal to hike the dearness allowance (DA) by 4%. The government also increased the Dearness Relief (DR) given to pensioners by 4%. After the hike, the DA and DR will become 38% of the basic pay from the earlier 34%, effective July 1, 2022.
Why does this story matter?
- The increase in Dearness Allowance ahead of major festivals like Dussehra and Diwali would provide central government employees with extendable income.
- DA is a set proportion of your base income. The allowance helps to mitigate the effects of inflation.
- This is the second hike in DA for central government employees in 2022. Earlier, it was hiked in March.
Over 1 crore employees, pensioners to benefit
According to the directive by Narendra Modi-led Cabinet, both the dearness allowance for central staff and dearness relief for pensioners will now be 38%. The move will impose an additional yearly burden of almost Rs. 12,000 crore on the central government fund for staff payments, said officials. The government's move will immediately help 50 lakh central employees and 62 lakh pensioners.
Government to pay release pending arrears in September
The benefit of the DA hike will be applicable to the employees and pensioners from July 1, 2022. Earlier, it was increased in March 2022, effective from January. At that time the dearness allowance of central employees and pensioners was increased from 31% to 34%. Meanwhile, the employees and pensioners will also get arrears of two months in September.
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 public sector employees, while the VDA is applicable for central government employees.
How do we 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.