Dearness Allowance: State Govt employees to face DA cut after Central Government Employees?

Dearness Allowance Latest News: The economic fallout of Coronavirus pandemic has forced the Central government to freeze the dearness allowance increment for 48 lakh Central Government Employees and Dearness Relief for 65 lakh Central Government Pensioners. In an Office Memorandum on Thursday, the Finance Ministry said that additional instalment of DA payable to Central Government employees and Dearness Relief (DR) to Central Government pensioners due from January 1, 2020, will not be paid. Even as the DA hike payment has been stopped, employees and pensioners will continue to be paid the DA and DR at the current rates. The news of stopping DA and DR hikes for Central Government employees and pensioners came just a few weeks after the Central Government had cleared the proposal to implement DA, DR hikes with effect from January 2020.

States to follow suit?

While Central Government Employees and Central Government pensioners will not get DA hike, it is expected that the states may also soon follow in the footsteps of the Centre and stop payment of additional instalments of DA, DR to their employees and pensioners because of Coronavirus crisis. Several states had recently announced DA hikes for their employees.

According to a report by The Indian Express, it is expected that states may also announce similar decisions as they generally follow the Central Government on DA and DR decisions.

According to a report by FE Bureau, by stopping the DA and DR dues, the Central Government is expected to make a saving Rs 25,000 crore in FY 2020-21. The states are likely to save another Rs 55,000 crore among themselves in the current financial year, taking the total savings for the general government budget in FY 21 to Rs 80,000 crore. Both Centre and states are expected to save another Rs 40,000 crore in FY22.

The Government is likely to use the savings from DA, DR cut to meet the additional demand for resources for healthcare and welfare of people hit by the pandemic.

What Centre decided on Thursday

As per the Finance Ministry’s O.M., Central Government Employees and Pensioners will not be paid the additional installments of DA and DR due from January 1, 2020, July 1, 2000 and January 1, 2020.

Last month, the Central Government had announced an increase in DA by 4% for six months starting January 1, 2020. Similar hikes were due for the six-month periods starting from July 1, 2020 and January 1, 2020.

The DA/DR hikes by the Central Government are decided as per the recommendations of the 7th Pay Commission.

(This report was published on April 24, 2020)