The Narendra Modi-led government is expected to increase the dearness allowance (DA) for central government employees by 3%, according to a recent report by CNBC-TV18. If approved, this would mark the second hike this year in both dearness allowance (DA) and dearness relief (DR). The decision is anticipated to be officially announced in September.
At present, the dearness allowance for central government employees stands at 50%. With the proposed increase, the DA is likely to rise to 53%. However, the report suggests that the government may not release the arrears that have been pending since the COVID-19 pandemic. Currently, employees are still awaiting arrears for an 18-month period.
The dearness allowance for central government employees is calculated based on the Consumer Price Index for Industrial Workers (CPI-IW), which is released monthly by the Labour Bureau. The formula used to determine the DA for central government employees is:
DA percent= (Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76) *100 where AICPI stands for All India Consumer Price Index, from the CNBC-TV18 report.
For public sector government employees, the calculation is slightly different:
DA percent = ((Average of AICPI (Base Year 2016=100) for the past 3 months -126.33)/126.33) *100
The last time the government announced a DA increase was on March 7, 2024, which was effective from January 1 of the same year. The increase raised the DA to 50%.
The 7th Pay Commission, established in 2014, plays a key role in adjusting the salaries of central government employees. Typically, a pay commission is constituted every 10 years to review and revise pay scales.
As employees eagerly await the official announcement, the potential increase in DA is likely to bring some relief to central government employees amidst rising inflation and cost of living.
