Under the Whispers of the 8th Pay Commission, Here's the Centre's Statement Regarding the Halting of Dearness Allowance Increases
The ongoing economic disruption caused by the Covid-19 pandemic has led to a decision to freeze three instalments of dearness allowance (DA) and dearness relief (DR) for Central Government employees and pensioners. This move was taken to ease the financial pressure on government finances amid the severe economic disruption caused by the pandemic.
The freeze, which covered the installments due in January 2020, July 2020, and January 2021, was an austerity measure implemented to manage the fiscal stress created by the pandemic-induced economic slump and the significant welfare spending required during the crisis. Despite the country's economic recovery, the government has ruled out releasing these arrears, stating that the adverse fiscal impact of the pandemic and the costs of welfare measures extended beyond the 2020-21 financial year, making it not feasible to pay the frozen DA/DR arrears.
The Ministry of Finance has clarified that arrears of dearness allowance (DA) and dearness relief (DR) frozen during the Covid-19 period will not be released. This means that Central Government employees and pensioners have not received inflation compensations for the frozen period retroactively.
DA and DR are cost-of-living adjustments paid to employees and pensioners respectively, meant to offset the impact of inflation. The freeze means that these adjustments were not paid retroactively during the pandemic period.
The Minister of State for Finance, Pankaj Chaudhary, stated that the adverse financial impact of the pandemic in 2020 and the financing of welfare measures taken by the government had a fiscal spillover beyond FY 2020-21, making the release of arrears of DA/DR not feasible.
The freeze was implemented on January 1, 2020, July 1, 2020, and January 1, 2021. As per standard practice, when a new pay commission is implemented, the DA component is reset to zero. Currently, under the 7th Pay Commission, the DA stands at 55% of the basic pay.
The 8th Pay Commission, which was granted in-principle approval by the Union Cabinet in January, is yet to be formally constituted. Once formed, the 8th Pay Commission will engage in discussions with stakeholders and submit a detailed report, which is expected to take more than a year. The report from the 8th Pay Commission will recommend updates to the fitment factor and overall salary structure for central government employees. The formation and recommendations of the 8th Pay Commission may have implications for the release of arrears of DA/DR.
It is important to note that the 8th Pay Commission has not yet reset the DA component to zero. Dearness Relief (DR) serves the same purpose for pensioners.
This position has been reiterated in official parliamentary responses from the Finance Ministry, emphasizing fiscal prudence due to extended pandemic-related expenditures and ongoing fiscal constraints despite overall economic recovery. The decision was made in response to a query raised in Parliament about reconsidering the 18-month DA/DR freeze implemented from January 2020 to June 2021.
In conclusion, the freeze on dearness allowance (DA) and dearness relief (DR) arrears for Central Government employees and pensioners remains official and final as of mid-2025. The 8th Pay Commission, once formed, may have implications for the release of these arrears. Central Government employees and pensioners are advised to stay informed about the progress of the 8th Pay Commission and any potential changes to the DA/DR freeze.
- The economic recovery of the country, despite being underway, has not resulted in the release of the arrears for the frozen dearness allowance (DA) and dearness relief (DR) for Central Government employees and pensioners, due to fiscal constraints stemming from the pandemic and its aftermath.
- The financial impact of the pandemic on the government's finances, coupled with the increased welfare spending during the crisis, has necessitated the freeze on adjustments meant to offset the impact of inflation (DA and DR) for both employees and pensioners.
- The government's stance on the arrears of frozen dearness allowance (DA) and dearness relief (DR) remains unchanged, as the adverse financial effects of the pandemic and the costs of welfare measures have extended beyond the 2020-21 financial year, making it infeasible to pay the arrears at this time.
