Dehradun, Uttarakhand:

With the expected 3% hike in September, the total dearness allowance (DA) will rise to 53%. Last year, the DA hike was officially announced on July 1 ahead of the festive season on October 18, 2023. Dearness Allowance is a calculation based on inflation and an allowance paid to civil servant employees, certain private sector employees, and civil servant pensioners in India. Dearness Allowance is calculated as a percentage of the basic pay of an Indian citizen to reduce the impact of inflation on people. DA or dearness allowance is paid to serving government employees, while DR, or dearness relief is allotted to pensioners.

Dearness Allowance by Central Government The second hike in DA and Dearness Relief (DR) for employees and pensioners is expected to be announced in September from July 2024. It is expected that the Prime Minister Narendra Modi-led government may approve a 3% hike in DA and DR during this phase.

This hike in DA also brings with it a hike in several other allowances including House Rent Allowance (HRA). The government usually announces a hike in DA/DR every two years, updates about which are shared in March and September. However, these hikes are applicable retrospectively from January and July of the year.

The calculation of DA hike is determined based on the All India Consumer Price Index (AICPI), which monitors changes in retail prices across various sectors. Initially, the DA hike was calculated using the Consumer Price Index with the base year 2001. However, from September 2020, the government has adopted a new Consumer Price Index with base year of 2016 for calculating dearness allowance.  The DA calculation formula with the new base year is as follows:

For Central Government Employees:

DA% = [(Average of AICPI (Base Year 2001 = 100) for last 12 months – 115.76)/115.76] x 100

For Public Sector Employees:

DA% = [(Average of AICPI (Base Year 2001 = 100) for last 3 months – 126.33)/126.33] x 100

From December 2023 to June 2024, the CPI-IW has increased by 2.6 points, from 138.8 to 141.4. As a result, the percentage of DA hike is expected to increase from 50.28% to 53.36% from July 2024.

Last year, the official announcement of DA hike on July 1 was made on October 18, 2023, before the festival season.

As per the previous practice, the central government has revealed the DA hike in July before the onset of the festive season. The previous pattern shows that the notification regarding the DA adjustment was released by the government immediately, so an announcement regarding the upcoming revision is expected soon. With the hike in DA and DR, the allowances that will get a hike include conveyance allowance, special allowance for children of women with disabilities, children education allowance, house rent allowance or HRA, hotel accommodation, reimbursement of travel charges for travel within the state or city (tourist destination), reimbursement of meal charges/lump sum or daily allowance, or travel performed by own car/taxi, auto rickshaw, own scooter etc. to a place where no specific rate has been prescribed by the concerned transport director. The rate of transportation of personal effects by road within the State or neighboring State, transfer, etc., dress allowance, split duty allowance, and deputation (duty) allowance will significantly increase the total compensation of Central Government employees.

An important provision in the 7th Pay Commission as per the mentioned guidelines is that when the dearness allowance (DA) becomes 50 percent of the basic pay, the rate of allowance increases to 24 percent. This special regulation has been intricately crafted to maintain equitable remuneration practices, which essentially underlines our firm commitment to promoting your welfare and security in adverse circumstances. The NDA government has not yet commented on the revision of DA rates. Normally, a Pay Commission is set up every decade to adjust the salaries of Central Government Government employees.

Article written by and Editorial credit: State Bureau Chief Himanshu Nauriyal.