Centre Freezes DA/DR Increase for Staff

• 24 Apr 2020

Why in News

The Finance Ministry has frozen the Dearness Allowance (DA) increases for the central government staff and Dearness Relief (DR) increases for pensioners for the period between January 2020 and July 2021.

Key Points

• The move will impact 48 lakh central government employees and 65 lakh pensioners.
• However, DA and DR at current rates will continue to be paid to the employees and pensioners.
  
  • The 4% DA hike for central government employees announced in March, 2020 . was effective from January 1, 2020.
• Since states generally follow the central government on DA and DR decisions, it is expected that states may announce similar decisions.
• The savings on account of freezing of increase in DA and DR to central government employees and pensioners would be Rs 37,530 crore in the current financial year and 2021-22.
  
  • This would create room for stepping up expenditure on health and welfare measures amid Covid-19 pandemic. Also, the government finances have been strained due to decline in tax and non-tax revenues.
  • If states follow the Centre, the estimated savings will be Rs 82,566 crore.
• Similar steps taken by the government :
  
  • Earlier, the Union Cabinet had cleared a 30% salary cut for all MPs, including the Prime Minister and Union Ministers, for a year.
  • It also decided to suspend all MPLADS (Members of Parliament Local Area Development Scheme) funds for two financial years—starting April 1,2020.
    
    • Under MPLADS, each MP gets Rs 5 crore annually for development work in his/her constituency.

Dearness Allowance and Dearness Relief

• DA and DR is part of the government’s policy to offset the impact of inflation on salaries and pension
  
  • DA is calculated on the basis of current basic pay of Government employees.
  • DR is calculated on the basis of basic pension of Government pensioners.
• The payments are made twice a year- in January and July according to the formula prescribed by the 7^th Pay Commission. Currently, they are fixed at 17% of the basic pay or pension.
• The DA is calculated based on the All-India Consumer Price Index for the past 12 months.

Source: IE