Any hope of merging 50 per cent Dearness Allowance (DA) for central government employees dashed as Finance Ministry has issued order for payment of additional instalment with effect from July 1, 2024.
“The rates of DA payable to Central Government employees shall be enhanced from 50 per cent to 53 per cent of the basic pay with effect from July 1, 2024,” an office memorandum dated October 21 by the Expenditure Department said. In order to compensate against price rise, the Union Cabinet took a decision to increase the DA in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission.
At the same DR (Dearness Relief) for pensioners too raised by 3 per cent to make it 53 per cent. The combined impact on the exchequer on account of both DA and DR would be ₹9,448.35 crore per annum. This will benefit about 49.18 lakh central government employees and 64.89 lakh pensioners.
As DA and DR has crossed 50 per cent mark. There was lot of speculation, whether DA/DR will be merged with basic as earlier, there used to be automatic merger but it is not happening this time.. The 5th Pay Commission had recommended that DA should be converted into Dearness Pay, each time the Consumer Price Index increases by 50 per cent over the base index used by the last pay Commission. Accordingly, the Government issued orders on February, 27 2004 for merging of 50 per cent of the DA with the basic pay w.e.f., January 1, 2004.
However, the 6th Central Pay Commission had recommended not to merge DA with basic pay at any stage. Government accepted this recommendation. Also, 7th Pay Commission also has not made any such recommendation which clearly means no automatic merger. This also means July instalment of DA/DR is not starring from ‘Zero’ but continue after 50 say 52 or 53 or 54 per cent.
This also mean there will also be no change in the calculation of Housing Rate Allowance. According to the 7th pay commission, entire country is divided into three categories — X, Y and Z. Based on the recommendation, the HRA rate for X categories of cities (Delhi, Greater Mumbai, Chennai, Kolkata, Pune, Hyderabad, Bengaluru and Ahmedabad), has gone up to 30 per cent as against 27 per cent. Similarly, rate for various tier-II cities such as Bhopal, Lucknow, Patna, Varanasi, etc, which falls into the Y category will go up to 20 per cent from the present 18 per cent. Employees in all other locations will get HRA according to the Z category and the rate will be 10 per cent as against 9 per cent.
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Based on minimum basic pay of ₹18,000; new rates of HRA will be ₹5,400; ₹3,600 and ₹1,800 respectively. Earlier, these rates were ₹4,860; ₹3,240 and ₹1,620 respectively. Had DA been merged into basic pay, the amount would have seen significant change.
Allowances such as transport allowance, staying accommodation allowance, dress allowance and gratuity etc. are revised upwards once DA reaches a certain level. However, these allowances are not calculated as percentage of value of DA. Rule says when DA touches 50 per cent, certain allowances and gratuity will be raised by 25 per cent.
It may be noted that based on the change in Consumer Price Index — Industrial Workers (CPI-IW), DA and DR are revised twice in a year. First revision is normally announced just before Holi and made effective from January 1. Similarly, second revision is decided just before Durga Puja and made effective from July 1.
