Big cheer! Cabinet approves 4% dearness allowance, dearness relief hike for central government employees; HRA & gratuity benefits announced

NEW DELHI: The Union Cabinet on Thursday approved a 4% hike in dearness allowance for central government employees, bringing the total to 50%. According to the government, this decision will benefit 50 lakh employees and 68 lakh pensioners. This will cost the government Rs 12,868 crore. Due to increase in DA, the government has also approved additional benefits for House Rent Allowance.
The hike in dearness allowance is determined by the central government based on the Consumer Price Index (CPI) data for industrial workers. The CPI-IW data is published monthly by the Labour Bureau, under the Ministry of Labour. This calculation follows a specific formula applicable to both employees and pensioners of the central government. Notably, this formula applies exclusively to central government employees and pensioners receiving salaries based on the 7th Pay Commission's recommendations.
The formula for DA calculation is:
7th CPC DA% = [{12 month average of AICPI-IW (Base Year 2001=100) for the last 12 months – 261.42}/261.42x100]
The current 12-month average for CPI-IW data stands at 392.83, which translates to a DA of 50.26% of the basic pay, states an ET report.
All government employees and pensioners receive dearness allowance (DA) and dearness relief (DR) as part of their salary to mitigate the impact of inflation. These allowances are periodically adjusted to revise the effective salary of government employees. This rise aligns with the established formula derived from the recommendations of the 7th Central Pay Commission.
The last hike in DA occurred in October 2023, with a 4% increase to reach 46%.
Crucially, the DA and DR hike will be applicable to central government employees and pensioners retrospectively from January 1, 2024. Therefore, employees and pensioners will receive arrears for the previous months.