Centre freezes DA for 18 months, eyes saving ₹38,000cr

TIMES NEWS NETWORK

New Delhi:24.04.2020

The finance ministry on Thursday announced an 18-month freeze on additional installments of dearness allowance for central government employees and dearness relief for pensioners, a move that will help it immediately cut spending by over ₹15,000 crore when the government is pressed for funds due to Covid-19.

The Centre is hoping to save ₹37,530 crore during the current and next financial years and states could gain by over ₹82,000 crore if they follow suit. The decision notified by the expenditure department includes the rollback of last month’s cabinet decision of a 4% increase in the dearness allowance for 48 lakh employees and the dearness relief for 65 lakh pensioners. It included paying arrears for three months since the decision was effective January 1.

Two future instalments have been put on hold

DA and the dearness relief is part of the government’s policy to offset the impact of inflation on salaries and pension. The payment is made twice a year – January and July – and is linked to the formula prescribed by the 7th Pay Commission. DA is typically linked to retail inflation and has hovered around 4% increase in recent months.

Currently, DA and dearness relief are fixed at 17% of the basic pay or pension, which will not be impacted by the government order. Only two future instalments have been put on hold and no arrear will be paid for this period.

The decision to hold back fresh DA comes at a time when the government is battling a severe financial crisis with its already stretched fiscal position. Not only is it being forced to step up spending to fight the pandemic, but its revenues have plummeted due to the lockdown as economic activity has come to a halt. The expenditure department has already prioritised spending and capped the amount that ministries can spend during the first three months of the current fiscal year.