DA Hike Of 3% Gets Cabinet Nod; 8th Pay Commission ToR Approval Remains Awaited

The Union Cabinet on Wednesday approved a 3% rise in dearness allowance for central government employees. Accordingly, the dearness relief for pensioners has also been increased by 3%.

This increment has raised DR and DA to 58% from 55% of the basic pay. The increase in the key allowance will cost the exchequer around Rs 10,084 crore, Union Minister Ashwini Vaishnaw said in a briefing following the Cabinet meeting.

The employees and pensioners will be eligible for arrears, as the DA and DR hike will come into effect from July 1.

The decision, which will benefit around 1.2 crore central government employees and retirees, comes ahead of the festive period of Diwali.

As per the breakdown given by Vaishnaw, a total of 49.2 lakh central government employees and 68.7 pensioners will be benefitted.

Notably, the DA and DR is revised bi-annually by the government to offset the impact of inflation. The last revision was announced in March, when the key allowance was raised by 2%.

Even as the Cabinet issued its nod for the increment of DA and DR, there was no word yet on the Terms of Reference (ToR) for the 8th Pay Commission.

The formation of the pay panel, which leads to a once-in-a-decade salary overhaul for government employees, received the Cabinet's greenlight in January this year. However, the ToR for the 8th Pay Commission is yet to be approved.

Employee union leaders await the Centre's clearance for the ToR, which will serve as the broad framework for the commission. Once the terms are set, then the panel will be formally setup.

After being formally constituted, the 8th Pay Commission will hold discussions various stakeholders, before proposing the fitment factor and other modalities for the revision of salaries and pensions. The entire process, as per the precedent, takes around 18 months.

In recent months, brokerages have indicated that the fitment factor—the multiplication unit used for salary revision—to be recommended by the commission may range between 1.8 to 2.46. This could result in an effective wage hike of 14% to 34%.