Following the Unified Pension Scheme (UPS), central government employees are set to receive another boost this month with an increase in dearness allowance (DA). Reports indicate that the government is expected to announce a 3-4 percent DA hike in the third week of September 2024.
A source revealed, “The government is expected to roll out a DA hike of 3-4 percent in the third week of September. The 3 percent hike is confirmed, but it can be 4 percent as well.”
In March 2024, the central government had previously raised the DA by 4 percent, bringing it to 50 percent of the basic pay. The dearness relief (DR) for pensioners was also increased by 4 percent.
Will Central Govt Employees Receive COVID-19 DA Arrears?
Union Minister of State for Finance, Pankaj Chaudhary, recently stated in Parliament that the government is unlikely to release the 18-month arrears for DA and DR that were withheld during the COVID-19 pandemic. When asked about the release of these arrears, Chaudhary responded, “No.”
The decision to freeze DA and DR installments due from January 1, 2020, July 1, 2020, and January 1, 2021, was made to mitigate economic disruptions caused by the pandemic and ease pressure on government finances.
Will DA Over 50% Merge With Basic Pay?
Experts suggest that the DA will not be merged with the basic pay if it exceeds 50 percent. Instead, it will remain separate until the 8th Pay Commission is established. Provisions exist for increasing other allowances, such as HRA, when DA surpasses 50 percent, which has already occurred.
In the 4th Pay Commission, DA once reached as high as 170 percent.
Formation of the 8th Pay Commission
Various employee unions have called for the formation of the 8th Pay Commission. However, there is currently no proposal from the government to establish it. Minister of State for Finance Pankaj Chaudhary stated on July 30, “Two representations have been received for the constitution of the 8th Central Pay Commission in June 2024. No such proposal is under consideration of the government at present.”
The 7th Pay Commission was established in February 2014, with its recommendations implemented from January 1, 2016. Typically, the government sets up a new pay commission every 10 years to revise employee remuneration.
How the Government Calculates DA Hike
The DA and DR hikes are based on the percentage increase in the 12-month average of the All-India CPI-IW. Although revisions are made on January 1 and July 1 each year, announcements are usually made in March and September/October.
In 2006, the formula for calculating DA and DR was revised. The DA percentage is determined as follows:
Dearness Allowance Percentage = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 12 months -115.76)/115.76)x100.
For central public sector employees:
Dearness Allowance Percentage = ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 3 months -126.33)/126.33)x100.