DA hike news: Centre raises dearness allowance to 50% of basic pay for its employees

The Union Cabinet on Thursday, March 7, hiked the dearness allowance (DA) to 50% of basic pay from the current rate of 46% effective from January 1 this year, benefitting over a crore employees and pensioners ahead of the Lok Sabha elections 2024, confirming an earlier report on CNBC-TV18.

“The Union Cabinet has approved to release of an additional installment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners from January 1, 2024, representing an increase of 4 percentage points over the existing rate of 46% of the basic pay/pension, to compensate against price rise,” Union Minister Piyush Goyal said after the Cabinet meeting.

The announcement comes ahead of the Lok Sabha elections 2024 and will benefit 48.67 lakh central government employees and 67.95 lakh pensioners.

The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be ₹12,868 crore per annum. The impact would be ₹15,014 crore during the year 2024–25 (January 2024–February 2025), news agency PTI said.

With the increase in DA, transport allowance, canteen allowance, and deputation allowance among others, have been increased by 25%. Likewise, the house rent allowance (HRA) has also been raised from 27%, 19% and 9% of basic pay to 30%, 20% and 10%, respectively.

Benefits under gratuity have been raised by 25%, with an increase in the ceiling of ₹25 lakh from the existing ₹20 lakh. The burden on the exchequer due to an increase in various allowances would be ₹9,400 crore annually.

The increase in DA and DR in accordance with the accepted formula, is based on the recommendations of the 7th Central Pay Commission, an official statement said. The decision is likely to benefit 49.18 lakh central government employees besides 67.95 lakh pensioners as Dearness Relief (DR) has been increased at the same rate, it added.

Revised every six months, the Dearness Allowance (DA) is a cost-of-living adjustment allowance provided by the government to public sector employees and pensioners. The adjustment in DA, applicable to both employees and pensioners, is determined based on the latest Consumer Price Index for Industrial Workers (CPI-IW), released monthly by the Labour Bureau.

It is calculated as a percentage of the basic salary.

For Central Government employees: Dearness Allowance percent = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76) *100

AICPI stands for All India Consumer Price Index.

Earlier on October 25, 2023, the Union Cabinet increased the DA by 4% under the 7th Pay Commission raising it from 42% to 46%.