DNA Explainer: DA for Central government employees hiked to 28% from July 1, what it means

The Centre on Wednesday increased the Dearness Allowance (DA) and Dearness Relief (DR) for central government employees and pensioners by 11% from the existing rate to bring it to 28% effective from July 1, 2021. The decision will benefit around 1.14 crore employees and pensioners.

The government had frozen all such hikes, which were due from January 1, 2020, July 1, 2020, and January 1, 2021, due to the ongoing COVID-19 pandemic.

The decision is expected to cost the government approximately Rs 34,400 crore and impact around 48,34,000 central government employees and 65,26,000 pensioners

Dearness allowance is paid by the government to its employees and dearness relief is given to the central government pensioners to compensate them for the rising cost of living due to inflation.

When did DA start

The Dearness Allowance was introduced following the Second World War, and was then known as the 'Dear Food Allowance'. The 'Old Textile Allowance' was also introduced in 1947, though this was revised and reintroduced in 1953 as the 'Revised Textile Allowance'.

Initially, DA was given in response to the demand of employees for wage revision. However, later it was linked to Consumer Price Index. In the past, various committees have been constituted to look into the issue of payment of DA to Central Government employees.

Role of Pay Commissions in DA calculation

Every subsequent Pay Commission in India is expected to revaluate the salary of employees of the public sector taking into account the various components of the salary.

Dearness Allowance is taken into account for rolling out the next pay commission report. Pay commissions take into account all the factors that feed into the calculation of salaries of personnel in the public sector.

Reviewing and changing the multiplication factor also comes under the purview of the pay commissions.

DA hike main pointers

The DA and DR rates have been increased by 11% because three installments were kept frozen due to the pandemic situation.

Dearness Allowance is a component of the salary that cushions against inflation and is revised twice a year, January and July.

The increase in the DA and DR will impose an annual burden of Rs 34,400 crore on the exchequer.

For this financial year, the hike will cost the exchequer Rs 22,934.56 crore from July to February.

The hiked DA will be restored in July, which means government employees will receive a 28% DA of their basic pay in this month's salary.

The rate of DA and DR will remain 17% for the period of January 1, 2020, to June 30, 2021.

This means that the central government employees will not get any dues as they have been receiving the DA at a 17% rate.

The government has made it clear that the 28% hike will take effect on July salary and there will be no arrear for the period of January 2020-June 2021.