Centre hikes Dearness Allowance by 5% for employees

New Delhi: Ahead of Diwali, the Union cabinet chaired by Prime Minister Narendra Modi on Wednesday decided to hike Dearness Allowance of government employees by 5 per cent to 17 per cent.

The move was announced by Union Minister Prakash Javadekar and will benefit 50 lakh government employees and 62 lakh pensioners.

The Cabinet approved to release an additional installment of Dearness Allowance (DA) to Central government employees and Dearness Relief (DR) to pensioners with effect from July 1 this year representing an increase of 5% over the existing rate of 12% of the basic pay/pension, to compensate for price rise. 

This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission.

The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be Rs 15,909.35 crore per annum and Rs 10,606.20 crore in the financial year 2019-20 (for a period of 08 months from July, 2019 to February, 2020). 

This will benefit about 49.93 lakh Central government employees and 65.26 lakh pensioners.

The additional financial implication on account of this increase in DA is estimated at Rs 8,590.20 crore per year; and Rs 5,726.80 crore in the current financial year of 2019-20 (for 8 months from July 2019 to February 2020).

The additional financial implication on account of the DR to pensioners is estimated to be Rs 7,319.15 crore per annum and Rs 4,870 crore in the current FY.

DA/DR is paid to Central Government employees/pensioners to adjust the cost of living and to protect their basic pay/pension from erosion in the real value. DA/DR is revised twice a year from 1st January and 1st July.