The Union Cabinet has given its nod to a 4% increase in dearness allowance (DA) and dearness relief for central government employees and pensioners. This increase brings the DA rate to 46%, up from the previous 42%. The hike is set to take effect from July 1, with the aim of providing financial relief to government employees and pensioners during the festive season.
Financial Impact on the Exchequer
The 4% hike in DA and dearness relief will result in an annual expenditure of Rs 12,857 crore for the government. Approximately 48.67 lakh central government employees and 67.95 lakh pensioners will benefit from this decision. The increase is in line with the recommendations of the 7th Central Pay Commission.
Calculation of Dearness Allowance
The dearness allowance is calculated based on the Consumer Price Index for Industrial Workers (CPI-IW), which is released by the Labour Bureau on a monthly basis. The last revision in DA was implemented on March 24, 2023, and it became effective from January 1, 2023. The previous increase raised the DA to 42%, considering the percentage rise in the 12-month average of the All India Consumer Price Index for the period ending in December 2022. DA is provided to government employees and pensioners to account for the rising cost of living and increasing prices.
In addition to the DA hike, the government recently announced the grant of non-productivity linked bonus (ad-hoc bonus) for eligible employees for the year 2022-23. This ad-hoc bonus has been approved for Group C and non-gazetted Group B rank officials, including paramilitary forces. The ceiling for payment of ad-hoc bonus under these orders has been set at Rs 7,000.
The decision to increase DA and provide ad-hoc bonuses reflects the government’s commitment to addressing the financial needs of its employees and pensioners while taking into account economic factors and the cost of living.
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