Over 47 lakh employees and 68.62 lakh pensioners will benefit from this.
Central government employees and pensioners will receive a 3% dearness allowance (DA) and dearness relief (DR) hike.
The move was approved by the Union Cabinet just days ahead of Diwali.
With the hike, the DA for such employees now stands at 31% from 28% earlier.
Over 47 lakh employees and 68.62 lakh pensioners will benefit from this.
Contents
Compensation For Inflation
The increment should serve as compensation to help the beneficiaries tide over the rising inflation.
Retail inflation was 4.35% in September with rising costs of edible oils and auto fuels.
The government had slashed import duties on select edible oils and imposed stock limits on them to try to bring down prices.
The hike on the basic pay/pension will cost the exchequer Rs 9,488.70 crore per annum.
Hikes Resume After Suspension
The hike comes into effect from 1 July, 2021 when the government had finally approved pending DA and DR hikes after almost a year.
There was a freeze on dearness allowance and dearness relief benefits in 2020 due to a deficit in revenue collection after the pandemic hit the economy.
The hikes resumed from July 1, 2021 which increased the DA and DR to 28% from 17%.
The increase reflects the additional installments arising on 1 January, 2020, 1 July 2021 and 1 January 2021.
The DA and DR instalments are due for those four periods.
New Hike
The move to restore the hikes would cost Rs 34,400 crore.
After the latest 3% hike, the DA and DR for central government employees and pensioners will increase to 31%.
Therefore, DA and DR benefits will increase further when the approved decision comes into effect.
Retired central government employees will receive cash payment and gratuity.
Calculation
Employees and pensioners need to find the equivalent percentage of their basic salary to get the DA amount that they would receive.
For example, if an employee is paid Rs 20,000 per month, 3% of that would be about Rs 600.
So thanks to the latest hike, they will receive an additional Rs 600 on top of the basic salary of Rs 20,000.
Given that the total hike is now 31%, then 31% of Rs 20,000- i.e. Rs 6,200 will be the amount they receive.