The finance ministry on Thursday decided to put on hold increment in dearness allowance (DA) for 50 lakh central government employees and dearness relief (DR) for 61 lakh pensioners till July 2021 as the Covid-19 pandemic and resultant halt in economic activity have put the government's finances under strain. The government will, however, continue to pay the DA and DR at existing rates.
"In view of the crisis arising out of COVID-19, it has been decided that additional installment of dearness allowance payable to central government employees and dearness relief to central government pensioners due from January 1, 2020, shall not be paid. The additional installment of DA and DR due from July 1, 2020, and January 1, 2021, shall also not be paid," the Department of Expenditure said in an office memorandum.
Dearness Allowance is calculated as a percentage of basic salary and paid to government employees, public sector employees and pensioners to mitigate the impact of inflation. And Dearness Relief is a percentage of the basic pension or family pension that accrues to the pensioners.
The central government will save Rs 37,530 crore and state governments would save Rs 82,566 crore in the current financial year and 2021-22 as a result of the freeze in DA and DR increments, as per estimates. The cumulative savings at the Central and State levels would add Rs 1.20 lakh crore to the government's Covid- war chest.
The last DA hike for central government employees was effected last month effective January 1. 2020. The Cabinet had approved a 4 per cent increase in DA for government employees and pensioners to 21 per cent. With Thursday's decision, this 4 per cent hike has been put on hold.
The finance ministry had recently made it clear that it would not be reducing the pensions and assured that it was committed to the welfare and well being of all pensioners.