7th Pay Commission, DA Hike: After a 4% increase in Dearness Allowance (DA) for central government employees in January 2023, the government may further raise the DA by an additional 4% in July of this year, media reports said. The DA and Dearness Relief (DR) are reviewed twice a year, in January and July. Additionally, it has been reported that the hike in DA is expected to be calculated using a revised formula.
The Labour Ministry has revised the calculation formula for Dearness Allowance (DA) and updated the base year of DA in 2016. The Ministry also released a new series of Wage Rate Index (WRI) called the WRI-Wage Rate Index. The new WRI series has a base year of 2016=100, replacing the old series that had the base year of 1963-65, according to the Ministry.
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The Central Government follows a specific formula for revising the Dearness Allowance (DA) and Dearness Relief (DR) for its employees. The formula is as follows:
For calculating DA percentage: ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 12 months -115.76)/115.76)x100.
For Central Public Sector employees, the formula is slightly different: ((Average of All-India Consumer Price Index (Base Year 2001=100) for the past 3 months -126.33)/126.33)x100.
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As a result of the recent 4% hike in Dearness Allowance (DA) and Dearness Relief (DR), approximately 47.58 lakh central government employees and 69.76 lakh pensioners will see an increase in their salaries and pensions, respectively. The DA is based on the employee's basic pay, and an increase in DA will result in a corresponding increase in take-home pay.
For instance, an employee with a monthly take-home salary of around Rs 42,000 and a Basic Pay of approximately Rs 25,500 would have received Rs 9,690 as DA prior to the recent 4% hike. With the latest DA hike, this amount will increase to Rs 10,710, resulting in a monthly take-home pay increase of Rs 1,020.
The previous DA revision took effect on July 1, 2022, and was implemented on September 28, 2022. Based on the percentage increase in the 12-month average of the All India Consumer Price Index for the period ending June 2022, the Centre increased the DA by four percentage points to 38%.
