The Finance Ministry announced that dearness allowance for central government employees has been hiked to 31 per cent of the basic pay from the present 28 per cent, effective July 1, 2021.
The office memorandum of the Department of Expenditure which comes under the ministry of finance stated that the term 'basic pay' would imply the wages drawn as per the 7th pay commission and not include any other type of pay such as special pay, etc.
The hike would be applicable to civilian employees paid from the Defence Services Estimates and the expenditure would be chargeable to the relevant head of the Defence Services Estimates, the notice stated. It added that separate orders would be issued by the ministry of defence and the ministry of railways with regards to armed forces personnel and railway employees respectively.
The Union Cabinet on October 21 had approved a 3 per cent hike on dearness allowance for central government employees. The press statement had informed the 3 per cent increase is over the existing rate of 28 per cent of basic pay or pension and is meant to compensate for the overall price rise in the country.
According to the Cabinet, the hike will benefit 47.14 lakh current employees of the central government, along with 68.62 lakh pensioners. The combined impact on the exchequer on account of dearness allowance and dearness relief was calculated to be Rs 9,448.70 crore per annum.