Amid Buzz Around 8th Pay Commission, Here's What Centre Said On Dearness Allowance Freeze

In a major development concerning central government employees and pensioners, the Ministry of Finance has clarified that arrears of dearness allowance (DA) and dearness relief (DR) frozen during the Covid-19 period will not be released.

The response came after a query was raised in Parliament, questioning whether the 18-month DA/DR freeze, implemented from January 2020 to June 2021, would be reconsidered in light of the country's economic recovery post-pandemic.

Minister of State for Finance Pankaj Chaudhary, addressing the concern, stated, "The adverse financial impact of the pandemic in 2020 and the financing of welfare measures taken by the government had a fiscal spilloverbeyond FY 2020-21. Therefore, arrears of DA/DR were not considered feasible."

Dearness Allowance (DA) is provided to government employees to help offset the impact of inflation, while Dearness Relief (DR) serves the same purpose for pensioners.

"The decision to freeze three instalments of dearness allowance (DA) / dearness relief (DR) to Central Government employees / pensioners due from 01.01.2020 (January 1, 2020), 01.07.2020 (July 1, 2020) and 01.01.2021 (January 1, 2021) was taken in the context of Covid-19, which caused economic disruption, so as to ease pressure on government finance," the MoS Finance added.

The clarification comes at a time when there's rising speculation about the 8th Pay Commission, which was granted in-principle approval by the Union Cabinet in January. However, the panel is yet to be formally constituted.

Once formed, the commission will engage in discussions with stakeholders and submit a detailed report, typically taking more than a year. The report will recommend updates to the fitment factor and overall salary structure for central government employees. Notably, when a new pay commission is implemented, the DA component is reset to zero, as per standard practice. Currently, under the 7th Pay Commission, the DA stands at 55% of the basic pay.