Central government employees may soon witness a salary hike, with the Centre likely to announce a Dearness Allowance (DA) increase this September. The expected hike, effective from July 1, 2023, is projected to be 3%, bringing the total DA to 45%.
The DA adjustment for employees and pensioners is determined based on the monthly Consumer Price Index for Industrial Workers (CPI-IW) reported by the Labour Bureau, a branch of the Labour Ministry.
The most recent data reveals that the All-India CPI-IW for July 2023 rose by 3.3 points to 139.7. The one-month percentage change indicates a 2.42% increase compared to the previous month, compared to a 0.90% increase during the same period the previous year.
DA, granted to government employees, and DR (Dearness Relief), provided to pensioners, typically receive biannual adjustments in January and July. The All India Railwaymen Federation had previously sought a 4% DA increase, but the actual hike is likely to be a little over 3%, pushing it to 45%.
The Ministry of Finance's expenditure department will prepare a proposal for the DA hike, including its fiscal implications, and submit it to the Union Cabinet for approval. Currently, more than one crore central government employees and pensioners receive a 42% dearness allowance.
The last increase in March 2023 saw a 4% rise, increasing it to 42%. Considering the current inflation rate, experts anticipate a 4% increase in the upcoming DA hike. Multiple state governments, including Madhya Pradesh, Odisha, Karnataka, Jharkhand, and Himachal Pradesh, have also raised dearness allowances for their employees recently.
The DA and DR hike is based on the percentage increase in the 12-month average of the All India Consumer Price Index (AICPI) up to June 2022. Although the central government typically revises allowances on January 1 and July 1 each year, the announcements usually occur in March and September.
In 2006, the central government revised the formula for calculating DA and DR for its employees and pensioners.
The formula for calculating DA is as follows:
Dearness Allowance Percentage = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 12 months - 115.76) / 115.76) x 100.
For central public sector employees, the formula is:
Dearness Allowance Percentage = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 3 months - 126.33) / 126.33) x 100.
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