7th Pay Commission: To provide some relief to central government employees and pensioners amid the rising inflation and Covid-19 pandemic, the central government on Wednesday announced to increase Dearness Allowance (DA) and Dearness Relief (DR). The Cabinet Committee on Economic Affairs (CCEA) hiked DA to 28 per cent. The new rate will be effective from July 1, 2021. This move will benefit nearly 50 lakh employees and around 65 lakh pensioners.
“The Cabinet Committee chaired by the Hon’ble Prime Minister Shri Narendra Modi today has approved increase the Dearness Allowance to Central Government employees and Dearness Relief to pensioners with effect from 01.07.2021 to 28% representing an increase of 11% over the existing rate of 17% of the Basic Pay/Pension,” the Centre said in a statement.
In the light of coronavirus pandemic in the country, the Centre put a hold on the dearness allowance of the central government employees last year. “In view of the unprecedented situation which arose due to the COVID-19 pandemic, three additional instalments of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners, which were due from 01.01.2020, 01.07.2020 and 01.01.2021, had been frozen,” the Cabinet said in a statement. The employees and pensioners have not received any DA arrears from January 1, 2020 to June 30, 2021. It was earlier mentioned that any hike in DA due to revision on July 1, 2021, will take into account the previous hikes as well.
“Last year, the Central Government had taken a decision to suspend disbursement of DA in order to save funds for dealing with the medical emergencies due to the pandemic. The hike in the DA will come as a relief and serve as a financial boost to both, serving government employees as well as pensioners,” said Amrita Tonk, partner, L&L Partners.
DA Hike Calculation:
The central government employees and pensioners has been receiving 17 per cent DA since July, 2019. “#Cabinet approves restoring of three instalments of Dearness Allowance and Dearness Relief with effect from 01.07.2021 representing an increase of 11% over the existing rate of 17% of the Basic Pay/Pension. No arrears for the period from 01.01.2020 till 30.06.2021 shall be paid,” said Jaideep Bhatnagar, principal spokesperson, government of India and principal director general of Press Information Bureau.
Dearness Allowance is a component of salary of government employees and pensioners, aimed at soothing the impact of inflation. The Centre revises DA twice every year – in January and July. It is to help the employees and pensioners to cope up with the rising inflation. As DA is related to cost of living, it varies from employee to employee based on whether they work in urban sector, semi-urban sector or the rural sector.
The retail inflation dropped to 6.26 per cent in the month of June. Consumer Price Index inflation was over the Reserve Bank of India’s (RBI) threshold of 6 per cent for the second straight month. The wholesale price-based inflation eased marginally to 12.07 per cent in June.
“This is a welcome move since coronavirus has really shaken the economic foundation of the country, and DA is paid to offset inflation. Inflation affects the price of everything, and it’s impact may vary marginally from location to location, so hopefully this increase will bring relief to the beneficiaries,” said Sajai Singh, partner, J Sagar Associates.
The Union government is likely to restore the 7th pay commission Dearness Allowance and Dearness Relief benefits by September now, according to media reports.