Business strategy

Govt Employee Salary To Rise Soon As Dearness Allowance May Be Hiked 4%

7th Pay Commission: The government employees may soon get a good news about their salaries as their dearness allowance (DA) is expected to be hiked by 4 per cent, according to media reports. The All-India Consumer Price Index (Industrial Workers)’s May data also suggests the possible rise in the DA. The DA is set to be increased this month as it is revised twice a year — January and July.

The All India Consumer Price Index (AICPI) is the parameter, on the basis of which the DA is revised. Now, as the AICPI is prevailing high above the RBI’s tolerance level, the chances of government employees getting a raise in dearness allowance is also high. The retail inflation in June stood at 7.01 per cent, which is above the RBI’s target level of 2-6 per cent.

According to the latest media reports, dearness allowance of the employees is likely to be hiked by 4 per cent, after which the DA could reach 38 per cent.

In March, the Union Cabinet had approved to increase 3 per cent in dearness allowance (DA) under the 7th Pay Commission, thus taking the DA to 34 per cent of the basic income. Over 50 lakh government employees and 65 lakh pensioners are getting profit from this move.

“The Union Cabinet chaired by the Prime Minister Narendra Modi has given its approval to release an additional instalment of dearness allowance (DA) to central government employees and Dearness Relief (DR) to pensioners w.e.f. January 1, 2022, representing an increase of 3 per cent over the existing rate of 31 per cent of the basic pay/ pension, to compensate for price rise,” the Prime Minister’s Office had said in a statement.

The reports also said the issue of DA arrears may also be addressed soon and the employees of the central government may also receive Rs 2 lakh in pending arrears in one go. The amount of DA arrears is decided by the employees’ pay band and structure.

The Centre had held back three instalments of DA and DR for January 1, 2020; July 1, 2020; and January 1, 2021, in view of the unprecedented situation which arose due to the COVID-19 pandemic. In a reply to a query in the Rajya Sabha in August 2021, Finance Minister Nirmala Sitharaman said the holding back of DA and DR saved about Rs 34,402 crore.
How is DA under 7th Pay Commission Calculated?

In 2006, the central government had revised the formula to calculate the DA and DR for central government employees and pensioners.

Dearness Allowance Percentage = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 12 months -115.76)/115.76)x100.

For Central public sector employees: Dearness Allowance Percentage = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 3 months -126.33)/126.33)x100.

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