5% hike in Dearness Allowance okayed by Cabinet on 7th Pay Commission formula: All you need to know
The Cabinet decision to hike the dearness allowance for employees and pensioners by 5% will annually cost the government Rs 16,000 crore, the government said on Wednesday. The increase in the dearness allowance and dearness relief is in accordance with the accepted formula finalised on the recommendation of the 7th Central Pay Commission.
Union minister Prakash Javdekar announced the DA hike at a media briefing after a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi. The 5% hike over the existing rate of 12% of the basic pay will raise the total dearness allowance to 17%.
A statement issued by the government later said the combined impact on the exchequer on account of both Dearness Allowance (payable to employees) and Dearness Relief (to pensioners) would be Rs. 15909.35 crore per annum and Rs 10,606.2 crore for the remaining part of the current financial year. This will benefit about 49.93 lakh Central Government employees and 65.26 lakh pensioners.
The additional financial implications on account of this increase in Dearness Allowance is estimated at Rs 8590.2 crore per year; and Rs 5726.80 crore in the current financial year of 2019-20. The additional financial implication on account of Dearness Relief to pensioners is estimated to be Rs 7,319.15 crore per annum and Rs 4,870 crore in the current fiscal.
Dearness allowance and relief is paid to central government employees and pensioners to adjust the cost of living and to protect the real value of their basic pay and pension.
Dearness Allowance and relief is revised twice a year and comes into effect from 1 January and 1 July.