4% DA Hiking: As the government took a long-awaited decision to increase the High Cost Allowance (DA) and High Cost Relief (DR) by 4%, it was a boon for 48 lakh central government employees and 68 lakh retirees in the country ahead of Diwali and festive season. From now on, the salaries of central administration employees will increase.

The decision to increase the DA was taken at a Union cabinet meeting on Wednesday. After the hike, the DA or DR will now be 38 percent of base salary or pension, respectively. It will come into force on July 1, 2022. The DA was last revised in March.

How much will your salary increase

The increase in the DA will increase the expensive part of the salaries of central government employees. For example, if someone’s salary is Rs 50,000 per month and has Rs 15,000 as base salary. So far, you receive 5,100 rupees which is 34% of the base salary. However, now after the 4% hike, you will get Rs 5700 per month which is Rs 600 more. So, if you have a salary of Rs 50,000 per month with Rs 15,000 as base salary, your salary will increase by Rs 600 per month.

Financial impact on the public treasury

The government has stated that the combined impact on the treasury from both DA and DR will be in the range of Rs 12,852.56 crore per annum; and Rs 8,568.36 crore in the financial year 2022-23 (i.e. for a period of 8 months from July 2022 to February 2023).

How does the government decide on the DA hike?

The rise in DA and DR is decided on the basis of the percentage increase in the 12 month average of the All India Consumer Price Index (AICPI) for the period ending June 2022. Although the central government reviews the allocations on January 1 and July 1 each year, the decision is usually announced in March and September.

In March, the Union Cabinet had approved a 3% increase in the DA under the 7th Wage Board, bringing the DA to 34% of Basic Income.

In 2006, the central administration revised the formula for calculating the DA and DR for employees and retirees of the central administration.

Expensive Allocation Percentage = ((All India Consumer Price Index Average (base year 2001=100) for last 12 months -115.76)/115.76)x100.

For Central Public Sector Employees: Dearness Allowance Percentage = ((Average of All India Consumer Price Index (base year 2001=100) for last 3 months -126.33) /126.33)x100.

Rajasthan government also raises DA

A day after the Centre’s move, the Rajasthan government on Thursday increased the DA and DR for state government employees by 4%. According to a statement from the office of the Chief Minister, “From now on, a dearness allowance of 38% will be paid to state employees and pensioners from July 1, 2022”.

He added that the decision is expected to benefit 8 lakh employees and 4.40 lakh retirees.

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