Financial Daily from THE HINDU group of publications
Saturday, Feb 21, 2004
Government - Human Resources
Cabinet clears DA merger proposal for Govt staff
New Delhi , Feb. 20
THE Cabinet on Friday cleared the proposal to merge 50 per cent of the dearness allowance (DA) and dearness relief (DR) of the Central Government employees and pensioners with their basic pay and pension respectively. At present, DA is being paid at 59 per cent of basic pay.
The Cabinet also approved a proposal to release cash payment of an additional instalment of DA and DR to employees and pensioners as due from April 1, 2004, amounting to two per cent of the existing DA rate of 59 per cent.
The payment of the higher amounts would be with effect from January 1, 2004. The move to merge 50 per cent of the DA with basic pay was announced by the Finance Minister, Mr Jaswant Singh, in the interim Budget for 2004-05.
The impact of the Cabinet's decision will be a 4.5-per cent increase in the existing basic pay and pension of all Central Government employees and pensioners while the pecuniary benefits on future instalments of DA and the Dearness Pay (as the merged portion of DA/DR would be termed in future) would go up by 50 per cent.
The employees and pensioners would also benefit by way of increase in other allowances linked to basic pay such as house rent allowance, official sources said.
A special dispensation has been allowed for pensioners retiring between April 1, 2004 and January 31, 2005 in the form of 50 per cent of DA being taken as basic pay for purposes of computation of pension. This has been done so that such pensioners do not face any loss in fixation of pension that is based on average emoluments during the last 10 months in service.
The total impact of this on the exchequer for a full financial year has been estimated at a maximum of Rs 1,458.24 crore while for financial year 2004-05, the impact would be higher at Rs 1,702.44 crore on account of absorbing the arrears from January 1, 2004.
For a full financial year the impact of DA/DR would be Rs 729.62 crore while the additional implication on account of increase of DA is estimated at Rs 525.62 crore. In case of increase of DR to pensioners, the additional implication for the full year would be Rs 204 crore. However, for fiscal 2004-05 the outgo on the three counts has been estimated at Rs 851.22 crore, Rs 613.22 crore and Rs 238 crore respectively.
The 50 per cent of DA and DR that would be merged with basic pay would be shown as Dearness Pay (DP) and Dearness Pension (DrP) on the payslip and would be counted for all payments of allowances such as transfer grant and retirement benefits.
However, LTC, TA/DA continue to be governed on the basis of basic pay alone without taking into account DP.
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