Posted by New Delhi: The Cabinet Committee on Economic Affairs (CCEA) is expected to approve a 4 per cent 7th Pay Commission hike on Thursday, March 7, 2024. The Union Cabinet in October 2023 raised the dearness allowance by 4 per cent benefiting over 48 lakh government employees and nearly 68 lakh pensioners.
This implied a hike in DA to 46 per cent from 42 per cent earlier. If the Union Cabinet clears 4 per cent DA hike on Thursday, the DA will touch 50 per cent this year, in a big relief for pensioners and government staffers.
What is dearness allowance?
Dearness Allowance or DA is the allowance received by government staffers to balance the rise in the cost of living based on inflation. DA forms a part of the employee’s basic salary. The government adjusts the DA twice a year, which comes into effect in January and July every year.
The government bases the DA hike on the All-India Consumer Price Index for Industrial Workers (CPI-IW) published every month by the labour ministry’s labour bureau. As of date, CPI-IW averaged 392.83 for 12 months. This pegs the dearness allowance at over 50 per cent of basic pay. Basic pay entails salary without bonus, overtime pay and other compensation.
What happens if DA crosses 50% of basic pay?
If the DA hike takes the allowance beyond the 50 per cent mark, government employees are expected to receive a hike in:
House rent allowance (HRA)
Children’s education allowance
Transport allowance
According to 7th Pay Commission recommendations, it was proposed to hike the HRA by 27 per cent, 19 per cent and 9 per cent when the dearness allowance crosses the 50 per cent mark. Last year the Centre gave its green signal to Diwali bonuses for Group C staffers and non-gazetted Group B officials. This included paramilitary forces. The Centre in FY23 set aside Rs 7,000 crore for ad hoc bonuses to central government staffers.