FAQ: Centre Freezes DA Hike – How This Impacts 1.14 Cr Employees

Does this mean the employees will no longer get their DAs? What happens to pensioners? Here’s all you need to know.

2 min read
Does this mean the employees will no longer get their DAs? What happens to pensioners? Here’s all you need to know.

The Indian government on Thursday, 23 April, rolled back the hike in dearness allowance (DA) of central government employees and pensioners till June 2021, amid the financial strains caused due to the coronavirus crisis.

The announcement will impact 1.14 crore employees and pensioners, and is expected to save about Rs 21,000 crore for the government's purse.

Does this mean the employees will no longer get their DAs? And what happens to pensioners?

We answer your FAQs about the DA hike freeze.

What is dearness allowance?

The dearness allowance is usually received by government employees and pensioners to compensate for the impact of inflation on the pay they received from the government. The DA us revised twice during the year – in January and July.

In March 2020, the Union Cabinet had approved the increase of DA from 17 percent to 21 percent.

Does this mean employees will not get their DAs at all?

No, employees will continue to get DA as it stood before the decision in March. The government has only put a freeze on the hike of four percentage points, which the central government employees were supposed to be getting with effect from 1 January, 2020. They will continue to receive DA at current rates, i.e, at 17 percent as a part of their salaries till June, 2021.

What about pensioners?

The dearness relief (DR), an allowance similar to DA is a part of pensions. The hike on the DR has also been put on hold.

The pensioners will also continue to receive 17 percent DR, as a part of their pension, till June 2021.

Will the employees and pensioners get the amount due as arrears post June 2021?

No, they will not be getting any arrears. The memorandum issued by the finance ministry states that no DA/DR arrears will be paid from 1 January 2020 to 30 June 2020. However, the revision in July 2021 will take into account the previous hikes as well.

How much money is the government saving?

In March, the Union cabinet — chaired by Prime Minister Narendra Modi — approved a 4 percentage point increase over the existing rate of 17 percent of the basic pay and pension to 48.34 lakh central government employees and 65.26 lakh pensioners.

This was expected to cost Rs 14,595 crore to the government in 2020-21, as it would include payments from January 2020 to February 2021, and Rs 12,510 crore subsequently every year, explained a report in BloombergQuint.

So, does this apply to state government employees as well?

It is for the state governments to decide about the DA/DR to their employees. However, it is widely expected that the states will follow the Centre in this regard.

(With inputs from BloombergQuint)

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