Pay Commission 7: 11% DA hike, 52 lakh employees to benefit

The union government has announce to restore Dearness Allowance (DA) benefits for its employees. Union Minister Anurag Thakur said that the the Cabinet has approved to increase the DA from 17% to 28%. 

“The Dearness Allowance (DA) for union government and pensioners employees has been increased from 17% to 28%. This will be applicable from 1 July 2021,” he said.

Sources said that the government may increase DA by 3% for its employees from July.

The development is a major relief for lakhs of union government employees and pensioners who have been waiting for the announcement for months.

The move comes on the back of several media reports speculating that dearness allowance and dearness relief benefits under the Seventh Central Pay Commission (7th CPC) would be restored July. The DA and DR hike benefits will come into effect from 1 July 2021. The move is expected to cost the government approximately Rs 34,400 crore.

Sources said that a decision could be taken at the Cabinet meeting which is currently underway at Prime Minister Narendra Modi’s residence. The decision will benefit nearly 52 lakh union government employees and around 60 lakh pensioners.

The DA is a part of the salary given to government employees and pensioners. Notably, the union government employees and pensioners currently get 17% DA under the 7th Pay Commission. 

Following the DA restoration, employees will get 28% DA. Accordingly, the monthly DA will go up by 11%. An employee’s basic salary will be increased by 11% from July.

The restored amount will be paid in three instalments.

Notably, the payment of DA of employees has not been revised since January 2020. The employees will receive their DA arrears for the period between 1 January 2020 to 1 January 2021 in three instalments.

To get an idea of how additional amount a union government employee will get after the DA restoration, let us see the following calculation.  As we all know that under 7th CPC the minimum Grade Pay of a Level-1 employee is Rs 1800 and his basic salary ranges from Rs 18,000 to Rs 56,900. So at the entry-level, an employee having basic pay of Rs 18,000, will see his take-home pay increase by Rs 1,980 (with effect from 1 July) before taking into account deduction towards provident fund and taxes.

Payment of arrears will entail a big outflow for the exchequer. For example, the minimum arrear that a Level-1 employee will get is  Rs 23,760(4% of Rs 18,000 for 6 months plus 7% of Rs 18,000 for 6 months plus 11% of Rs 18,000 for 6 months). Similarly, if we add up the arrear amount of all the union government employees and pensioners it will lead to a big outflow for the government.