Union Cabinet hikes Dearness Allowance by 3% with effect from July 1

The hike will increase the Dearness Allowance from 28 to 31 percent.

The Union Cabinet on Thursday approved a three percent hike in Dearness Allowance (DA) and Dearness Relief (DR) which is given to the central government employees and pensioners respectively. The hike will come into effect from July 1, 2021 which will increase the DA from 28 to 31 percent.

Union Minister Anurag Thakur said in a statement that the hike will benefit around 47.14 lakh central government employees as well as 68.62 lakh pensioners. However, the minister said that the increment in DA and DR will have an impact on the exchequer as there will be an annual burden of Rs 9,488.7 crore.

Earlier this year on July 14, the Central Government had announced a hike in the DA and the DR for central government employees and pensioners respectively from 17% to 28% which too was supposed to come into effect from July 1, 2021. The Centre had lifted an 18-month suspension announcing restoration of the DA and DR that had been frozen in April 2020 with effect from January 1, 2020 citing Covid-19 pandemic in order to use the money for vaccination against the disease. However, the Centre had clarified that the rate of DA and DR would remain at 17% for the period January 1, 2020 to June 30, 2021. 

DA and DR is paid by the government to the central government employees and pensioners respectively to reduce their burden of rising cost of living due to inflation. Meanwhile, the Department of Expenditure had issued a memorandum in September stating that the central government employees who had retired during the period of January 2020 to June 2021 would receive cash payment and gratuity.