On Wednesday, the Union Cabinet, led by Prime Minister Narendra Modi, approved a hike in dearness allowance (DA) and dearness relief (DR) for central government employees and pensioners. The move is expected to cost the government an additional Rs 34,400 crore and will take effect on July 1, 2021. A 28 percent hike has been made to the dearness allowance and dearness relief rates. Union minister Anurag Thakur said (01/01/2020, 01.07.2020 and 01.01.2021) that three additional installments of dearness allowance to central government employees and dearness relief to pensioners were frozen due to an unprecedented situation arising from the Covid-19 pandemic.
Central government employees and pensioners have been waiting months for the restoration of DA and DR hikes under the Seventh Central Pay Commission (7th CPC). The Centre had frozen dearness allowance and dearness relief benefit for lakhs of central government employees and pensioners last year because of a shortfall in revenue collection after the Covid-19 pandemic devastated the economy.
Details of DA, DR hikes
The cabinet finally took action on the approval today after considering three DA hikes (3 percent + 3 percent plus 4 percent) to be implemented on 01.01.2020, 01.07.2020, and 01.01.2021, respectively. In addition to the three pending installments, the Union Cabinet has approved an 11 percent hike in DA. Following the cabinet’s approval, the existing DA of 17 percent will rise to 28 percent. ‘As of July 1, 2021, the central government will increase dearness allowance for government employees and dearness relief for pensioners to 28 percent, an increase of 11 percent over the existing rate of 17 percent of basic pay or pension,’ Anurag Thakur said.
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Resuming the DA hike will benefit central government employees, who will see a substantial increase in their take-home pay. As a result, the provident fund and gratuity contribution will also increase. Based on the 7th Pay Commission matrix, the minimum basic salary of a central government employee is Rs 18,000, which consists of three components: basic pay, deductions and allowances. When all deductions are taken into consideration, the take-home pay of an entry-level employee with basic pay of Rs 18,000 will rise by nearly Rs 2,000.
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