New Delhi: India’s federal government on Thursday shelved disbursement of increased dearness allowance (DA) to its five million employees and over six million pensioners until July next year because of the strain on its finances due to the Covid-19 infused nationwide lockdown.
The government has decided to freeze the next two hikes as well as a result the government will not pay the hike in dearness allowance that was due from January 1, 2020, and the rates will remain the same till July next year.
The move will help the government save over over Rs 37,000 crore in the short run. If the states follow the Centre’s example, the combined savings will be 1.20 lakh crore.
A component of salary and pension of government employees, Dearness Allowance and Dearness Relief are meant to balance the rising living costs due to inflation. The government revises it twice a year.
“In view of the crisis arising out of COVID-19, it has been decided that additional instalment of dearness allowance payable to central government employees and dearness relief (DR) to central government pensioners due from January 1, 2020, shall not be paid,” the finance ministry said in a notification.
The government also said no arrears for the period from January 1, 2020, to June 30, 2021, will be paid.
The decision was taken at a meeting of the union cabinet on Wednesday. The union cabinet had approved a 4 percent hike in DA in March with effect from January 2020 for a total of 21 per cent.
The finance ministry said additional instalments of dearness allowance and dearness relief due from July 1, 2020, and January 1, 2021, will also not be paid. “Dearness allowance and dearness relief will continued to be paid at current rates,” the note, signed by additional secretary Annie George Matthew, stated.
The government’s tax revenues have plummeted because of the coronavirus lockdown while expenses have shot up because of the support provided to the vulnerable groups.
The next revision, the government said, will not be in July 2021 and the rates due from January 2020, July 2020, and January 2021 will be subsumed cumulatively in the revised rate.
This is the first direct impact of Covid-19 on central government employees. The government had earlier cut salaries of president, ministers and members of parliament by 30 percent. In addition, there MPLADs scheme has also been suspended for two years to provide more funds to fight the pandemic.