The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved an additional instalment of Dearness Allowance (DA) and Dearness Relief (DR) for central government employees and pensioners with effect from January 1, 2023. To account for increased costs, the new instalment represents a 4 per cent increase over the current rate of 38 per cent of the Basic Pay/Pension. While central government pensioners receive DR, public sector employees receive DA as a cost-of-living adjustment benefit.
In order to make up for the monthly salary/pension wealth's loss in purchasing power owing to inflation, the government normally adjusts the DA/DR rate every six months.
The dearness allowance for employees and pensioners is determined based on the latest Consumer Price Index for Industrial Workers (CPI-IW), released monthly by the Labour Bureau, a wing of the Labour Ministry. The DA percent for central government employees is calculated using the formula ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76) *100. For public sector (central government) employees, the formula is ((Average of AICPI (Base Year 2016=100) for the past 3 months -126.33)/126.33) *100.
For example, a government employee with a salary of Rs 60,000 will see a monthly increase of Rs 2,400 after a 4 per cent DA hike. The government has approved the additional instalment of DA and DR to help offset the effects of inflation and rising prices on central government employees and pensioners.
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