Five things to know about the proposed dearness allowance hike

Five things to know about the proposed dearness allowance hike

Government employees and pensioners are all set to report a rise in the proceeds they receive as part of their basic pay with retrospective effect from January 1, 2017 . Here are five things to know about the proposed dearness allowance hike.


  • The Centre is likely to announce a hike of 2-4 per cent in dearness allowance for its about 50 lakh employees and 58 lakh pensioners later this month. Dearness allowance and dearness relief are provided to employees and pensioners to neutralise the impact of inflation on their earnings. The labour unions, however, are not happy with the proposed hike saying it would not be able to offset the real impact of price rise.
  • As per an agreed upon formula, the Centre hikes the allowance taking 12-month average of retail inflation. The government does not consider the price rise rate beyond a decimal point for deciding the rate of the dearness allowance.
  • Confederation of Central Government Employees President K K N Kutty said the dearness allowance as per the agreed formula by the Centre works out to be 2 per cent which would be effected from January 1, 2017. However, Kutty expressed dissatisfaction over such a "meagre" hike saying that the consumer price index for industrial workers (CPI-IW) which is an agreed benchmark for increasing dearness allowance is far from reality. The dearness allowance is paid as proportion of the basic pay of the central government employees.
  • Earlier last year, the government hiked dearness allowance by 6 per cent to 125 per cent of basic pay. The DA was later merged into the basic pay following the implementation of the 7th Pay Commission award.
  • At present the Central government employees and pensioners are entitled to 2 per cent dearness allowance, which was effected from July 1, 2016.