The central government increased the Dearness Allowance (DA) by 4% for employees and pensioners, increasing the DA from 46% of basic pay to 50% effective January 1, 2024. Around 49.18 lakh employees and over 67.95 lakh pensioners would be affected by the estimated annual financial implications of ₹12,868.72 crore.
Impact of Other Allowances
Increase in dearness allowance (DA) to 50%, thus triggering about 25% increase in a number of other allowances for Central Government employees. The modality for the reimbursement of the Children Education Allowance (CEA) has been increased to ₹2,812.50 monthly regardless of actual cost incurred.
The Hostel Subsidy is now fixed at ₹8,437.50 monthly, irrespective of the amount actually incurred. CEA for differently-abled children of government employees is doubled to ₹5,625 per month. Women with disabilities are now entitled to a special child care allowance of ₹3,750 per month.
Financial Implications
The combined effect of increased DA and related allowances is significant. The ultimate effect of the DA increase will be the fresh annual burden of ₹12,868.72 crore. The actual projected financial implication for the fiscal year 2024-25 (January 2024 to February 2025) is ₹15,014 crore.
Beneficiaries
This increase would thus proportionately benefit around 49.18 lakh Central Government employees along with nearly 67.95 lakh pensioners.
Calculation of Dearness Allowance
The Dearness allowance is computed entirely based on the All India Consumer Price Index (AICPI), which is revised, at intervals, with an objective to neutralizing the effect of inflation on the salaries of government employees. The formulae used here are:
DA Percentage = ((Average of AICPI for the last 12 months – 115.76) / 115.76) × 100
Arrears Payment
Employees and pensioners entitled for arrears for the months that have lapsed since the DA effective January 1, 2024. The payment of these arrears would follow the normal government procedures.
Conclusion
The combined benefits would come from the 4% increase in Dearness Allowance as well as the corresponding increase in other related allowances–all resulting in significant financial relief to Central Government employees and pensioners as they would be better able to cope with rising inflation effects.