The Central Government has recently increased the Dearness Allowance (DA) and Dearness Relief (DR) for its employees and pensioners by 3%, bringing the total to 53% of the basic pay, effective from July 1, 2024.
This adjustment aims to offset the impact of inflation, as measured by the All India Consumer Price Index for Industrial Workers (AICPI-IW). The government revises DA and DR biannually, typically in January and July, to align with inflationary trends.
The latest increase has sparked discussions about the potential merger of DA with the basic salary, a practice that was implemented during the 5th Pay Commission in 2004 when DA exceeded 50%. However, the government has clarified that there will be no automatic merger of DA into the basic pay under the current framework.
Understanding Dearness Allowance (DA)
Dearness Allowance is a cost-of-living adjustment allowance paid to government employees and pensioners to mitigate the effects of inflation. It is calculated as a percentage of the basic salary and is revised periodically based on the AICPI-IW to ensure that the purchasing power of employees remains consistent despite rising prices.
Historical Context of DA Merger
In 2004, following the recommendations of the 5th Pay Commission, the government merged 50% of DA with the basic pay when the DA crossed the 50% threshold.
This merged amount was termed as ‘Dearness Pay’ and was used for calculating allowances and retirement benefits. However, subsequent pay commissions, including the 6th and 7th, did not recommend such mergers.
Current Scenario Under the 7th Pay Commission
The 7th Pay Commission, implemented in 2016, does not provide for the automatic merger of DA with the basic pay upon reaching any specific threshold. The government has accepted this recommendation, and as a result, even though the DA has now reached 53%, there will be no merger with the basic salary.
This means that the DA will continue to be calculated separately and will not reset to zero after crossing the 50% mark.
Impact on Allowances
While the DA itself will not merge with the basic pay, certain allowances linked to the DA are set to increase. For instance, when the DA crosses 50%, allowances such as House Rent Allowance (HRA), Children’s Education Allowance, and Transport Allowance are revised upwards.
The HRA rates, for example, are set to increase to 30%, 20%, and 10% of the basic pay for X, Y, and Z category cities, respectively.
Government’s Clarification
The government has explicitly stated that there will be no automatic merger of DA with the basic pay, even after it has crossed the 50% mark. This decision aligns with the recommendations of the 6th and 7th Pay Commissions, which did not advocate for such mergers.
Therefore, the DA will continue to be paid as a separate component, and the basic pay will remain unchanged in this context.
| Aspect | Details |
|---|---|
| Effective Date | July 1, 2024 |
| Previous DA Percentage | 50% |
| Revised DA Percentage | 53% |
| Impact on Basic Pay | No merger; DA remains a separate component |
| Affected Employees | Approximately 49.18 lakh central government employees and 67.95 lakh pensioners |
| Financial Implication | Additional annual burden of approximately ₹12,900 crore on the exchequer |
Will the 53% DA be merged with the basic salary?
No, the government has clarified that there will be no merger of DA with the basic salary, even after it has crossed the 50% threshold.
How often is the DA revised?
The DA is revised twice a year, typically in January and July, to account for inflationary trends.
What is the purpose of Dearness Allowance?
Dearness Allowance is provided to government employees and pensioners to offset the impact of inflation on their cost of living.
