The cabinet on Wednesday approved the proposal to increase the dearness allowance (DA) for central government employees and pensioners to 38 per cent of the basic pay from 34 per cent previously, up 4 per cent, effective July 1, 2022.
At the Cabinet Committee on Economic Affairs (CCEA) meeting headed by Prime Minister Narendra Modi the proposal to release an additional installment of DA was approved to compensate for the price rise.
Since the effective date for the latest dearness announcement hike is July 1, the staff would be paid the arrears with their latest salaries, in a festive cheer for about 47.68 lakh central government employees and 68.62 lakh pensioners and is also applicable for civilian employees and those employed in defence services.
The additional financial implications on account of this increase of Dearness Allowance to Central Government employees are estimated at Rs 6,591.36 crore per annum; and Rs 4,394.24 crore in the financial year 2022-23 - from July, 2022 to February, 2023.
The increase of Dearness Relief to pensioners are estimated to add Rs.6,261.20 crore per annum; and Rs.4,174.12 crore in the financial year 2022-23 in the financial year 2022-23.
The combined impart on the exchequer on account of both Dearness Allowance and Dearness Relief would be to the tune of Rs 12,852.56 crore per annum; and Rs 8,568.36 crore in the financial year 2022-23, that is, from July, 2022 to February, 2023.
The central government revises dearness allowance and dearness relief on January 1 and July 1 every year, but this decision is usually announced in March and September.
Previously, in March, the Cabinet had approved the proposal to increase the dearness allowance (DA) for central government employees and dearness relief (DR) for pensioners by 3 per cent to 34 per cent of the basic pay from 31 per cent previously, effective January 1, 2022.
The government, at the time, paid employees three months in arrears.
The central government revises dearness allowance and dearness relief on January 1 and July 1 every year, but this decision is usually announced in March and September.
Any changes to the dearness allowance are made as per the accepted formula, which is based on the recommendations of the 7th central pay commission to compensate for the rise in prices.
With retail inflation, or consumer price inflation, elevated above the upper-end of the Reserve Bank of India's target range of 2-6 per cent each month, the DA was hiked by 4 per cent to 38 per cent of basic pay.
All those who are paid based on the 7th Pay Commission will get an increase of Rs 720 in DA on the basic salary of Rs 18,000, and this increase will be Rs 1,000 per month if the basic salary is 25,000.
Similarly, those who were getting Rs 50,000 basic salary will now get a benefit of Rs 2,000 per month, and those with a basic salary of Rs 1,00,000 will get a benefit of Rs 4,000 in total salary after the 4 per cent increase in dearness allowance.
The grant of dearness relief (DR) to central government pensioners and family pensioners will also be applicable at the same revised rate, as it has been fixed for the employees, from July 1. The pension disbursing authorities, including the nationalized banks, will calculate the quantum of DR payable to each pensioner as per the individual case.
The revised rates will be applicable to central government pensioners, civilian central government pensioners/family pensioners, the armed forces pensioners, civilian pensioners paid out of the defence service, all India service pensioners, railway pensioners/family pensioners, and pensioners who are in receipt of provisional pension.
Until December 31, 2019, all the employees paid based on the 7th Pay Commission were getting a dearness allowance at the rate of 17 per cent, and after that, there was no increase or revision due to Covid for one and a half years after that.
Later, the dearness allowance was increased by 11 per cent to 28 per cent in July 2021, then again by 3 per cent in October 2021, and that too on July 1, 2021. Since July 1, 2021, DA on salary to all central employees and pension to pensioners was 31 per cent from July 1, 2021.
Then, in January 2022 also, the dearness allowance was increased by 3 per cent and the addition of 4 per cent effective July, will take the DA to 38 per cent of basic pay.
"Cabinet approves release of additional instalment of Dearness Allowance and Dearness Relief @ 4 per cent to Central Government employees and pensioners, due from 01.07.2022," the PIB tweeted.
Addressing a media briefing after the cabinet meeting, Union minister Anurag Thakur said the Cabinet has also decided to extend the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) for another three months.
The Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme was introduced after the outbreak of the COVID-19 pandemic.
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