New Delhi: Ahead of the Dusshera festival, the Centre is likely to hike dearness allowance (DA) by 2 per cent, which would benefit its over 10 million central government employees and pensioners, a top Finance Ministry’s official told.
The 7th Pay Commission recommended the merging of 125 percent dearness allowance into the basic pay.
The central government employees also now get 125 per cent dearness allowance from January, 2016 in pre revised scales.
The 7th Pay commission recommended new pay matrix, based on the Consumer Price Index 261.42, its effective date in January this year, while the 6th Pay commission had recommended the basic pay based on the Consumer Price Index 115.76 in January 2006.
As per practice, the government uses Consumer Price Index Industrial Workers ( CPI IW) data of the past 12 months to arrive at a quantum for the purpose of any DA hike.
Thus, the CPI IW from July 1, 2015 to June 30, 2016 would be used to take a final call on this matter.
The CPI (IW) of the months July, August, September, October, November, December, January, February, March, April, May and June were 263, 264, 266, 269, 270, 269, 269, 267, 268, 271, 275 and 277 respectively.
Average rate of Consumer Price Index Industrial Labour from July 2015 to June, 2016 was 2.90 per cent. Thus, the Centre will increase dearness allowance by two as per accepted formula for calculation, the official told us.
The proposed hike in DA is in accordance with the accepted formula based on the recommendations of the 6th Pay Commission as the 7th Pay Commission recommended to go for ditto in this regard, he added.
The new rate of DA will be implemented from July 1, 2016, which will be applicable for 4.8 million central government employees and 5.5 million pensioners. DA is paid as a proportion of basic pay of employees.
The proposal to hike in DA is likely to be moved by the Finance Minister Arun Jaitley on the basis of accepted formula for calculation under the 7th Pay Commission recommendation. The Union Cabinet will approve this hike in next meeting, ahead of the Dusshera festival for central government employees and pensioners.
The Centre revised DA twice in a year on the basis of one year average of retail inflation for industrial workers as per the accepted formula.
Earlier in April this year, DA was increased to 125 per cent from 119 per cent which was effective from January 1, 2016.
In September last year, the government had hiked DA by 6 percentage points to 119 per cent of basic pay with effect from July 1, 2015.