The Finance Ministry has recently decided to halt increases in the Dearness Allowance (DA) for central government employees and the Dearness Relief (DR) for pensioners. This decision will affect DA and DR increments from January 2020 to July 2021. Nevertheless, both employees and pensioners will still receive DA and DR at the existing rates. The latest increase of 4% in DA for federal government staff was announced in March 2020, with the changes applicable from January 1st, 2020.
Impact on Central Government Employees and Pensioners
About 48 lakh central government employees along with 65 lakh pensioners will be affected by this move. However, they will continue to receive their current DA and DR amounts. As state governments usually concur with central government decisions regarding DA and DR increments, similar resolutions are expected from them too.
Financial Savings and the Role of Pandemic
The freezing of DA and DR increments for central government workers and pensioners is projected to save around ₹37,530 crores in the present fiscal year and the next one, i.e., 2021-22. This considerable savings is intended to enhance allocations for health and welfare activities amidst the ongoing Covid-19 pandemic. It’s important to note that government finances have been under pressure due to a reduction in tax and non-tax revenues. If state governments follow suit as expected, the total savings are estimated to reach approximately ₹82,566 crores.
Previous Steps Taken By The Government
Earlier, the Union Cabinet had approved a 30% pay cut across all Members of Parliament, inclusive of the Prime Minister and Union Ministers, for one year. The government also decided to suspend the Members of Parliament Local Area Development Scheme (MPLADS) funds for two financial years — beginning April 1, 2020. According to the MPLADS scheme, each MP receives ₹5 crores annually for developmental activities within their respective constituencies.
The Concept of Dearness Allowance and Dearness Relief
Dearness Allowance and Dearness Relief are government policies designed to counterbalance the effects of inflation on salaries and pensions. DA is determined based on the current basic pay of government employees, while DR is calculated depending on the basic pension of government retirees. This payment is made twice a year — in January and July, according to the system established by the 7th Pay Commission. At present, both DA and DR are fixed at 17% of either the basic pay or pension. The DA is further determined by the All-India Consumer Price Index over the previous 12 months.
This news is sourced from The Indian Express.
