The central government retrospectively raised the dearness allowance (DA) and dearness relief (DR) for its employees and pensioners by 4 per cent, effective January 1, 2024. The latest hike brings the DA and DR benefits to 50 per cent of the basic pay. It will benefit about 49 lakh existing central government employees and 67.95 lakh pensioners.

Union Minister of Commerce & Industry Piyush Goyal approved the hike on March 7, 2024. It will cost the exchequer around Rs 15,014 crore from January 2024 to February 2025, or Rs 12,869 crore in the financial year 2024-25.

The hike is calculated according to the formula recommended by the 7th pay commission, which was established on January 1, 2016, and is set up every 10 years under the finance ministry. The first pay commission was established in 1946. The DA and DR hike, revised twice yearly, is calculated based on the consumer inflation index (CPI) data. It was last revised on October 27, 2023.

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After the 7th pay commission was implemented, the first DA hike of 2 per cent was announced on November 16, 2016, with a retrospective effect from July 1, 2016. DA and DR increased to 17 percent of the basic pay, effective July 1, 2019, and 46 percent, effective July 1, 2023.

The hike in DA affects other components of the salary. For example, house rent allowance is raised from 27 to 30 per cent for class X cities, 19-20 per cent for class Y cities, and 9-10 per cent for class Z cities. Transport, canteen, and deputation allowance also increased by 25 per cent.

As per the announcement, the gratuity increased by 25 per cent from Rs 20 lakh to Rs 25 lakh. The increment in allowance would cost around Rs 9,400 crore to the exchequer.

After the central government revises the DA and DR as per the pay commission’s formula, the state governments also implement it in their respective states.

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