7th Pay Commission: Cabinet hikes DA, DR for Central Govt employees from 17% to 28%

In a major relief for lakhs of Central Government employees, the Union Cabinet headed by Prime Minister Narendra Modi on Wednesday, July 14 approved the hike in Dearness Allowance (DA) and Dearness Relief (DR) benefits to employees and pensioners from 17% to 28%. The DA hike, effective from Thursday, July 1, 2021, will cost an outflow of Rs 34,400 crore per year to the government exchequer. It may be noted that the Centre had frozen DA and DR benefits to government employees and pensioners last year due to the fall in revenue collection and rising expenditure on welfare schemes following the COVID-19 outbreak.

At least three DA instalments were pending before the hike was approved by the cabinet — 4% from January 1, 2020, to June 30 2020, 3% from July 1, 2020, to December 31, 2020, 4% from January 1, 2021, to June 30, 2021.  An 11% DA hike has been approved as part of the three pending instalments. 

With the restoration of Dearness Allowance, government employees will see a big jump in their take-home salary, provident fund contribution as well as gratuity. Nearly 1.2 crore Central government employees including the pensioners would get DA and DR benefits under the 7th Pay Commission, which were halted since last year. According to the reports, the increased hikes in allowance would reflect in the salary of government employees in September 2021.

Dearness Allowance for Pensioners

Every time a new salary structure is coined by a pay commission, the pension for retired employees of the public sector is also revised. In the case of Dearness Allowance; every time Dearness Allowance is raised by a certain percentage, the same reflects in the pensions of retired public sector employees. This applies to both regular pensions as well as a family pension.

For pensioners, every time the Dearness Allowance is updated, it results in an increase in their monthly pension. For serving government employees, and those of government-owned companies, an increase in DA can lead to a substantial increase in their monthly pay-in-hand.