In a memo, the finance ministry stated, "In view of the crisis arising out of Covid-19, it has been decided that the additional installment of dearness allowance (DA) payable to central government employees and dearness relief (DR) to central government pensioners, due from 1st January, 2020 shall not be paid. Additional installments of DA & DR from 1 July 2020 & 1 Jan 2021 shall also not be paid," the Ministry of Finance said in a memo.
However, central government employees and pensioners will continue to get their DA and DR at current rates i.e. 17 per cent.
The ministry clarified that when the government will take the decision to release the future installment of DA and DR due from July 2021, the rates will be restored prospectively and will be subsumed in the cumulative revised rate effective 1st July 2021.
It is important to note that the government will not pay any arrears for the period between January 2020 and 30th June 2021.
However, the Union Cabinet in March had increased the DA and DR by 4 per cent, from 17 per cent of basic pay/pension to 21 per cent of basic pay/pension for central government employees and pensioners.
Almost 50 lakh government employees and 65 lakh pensioners benefit from the hike in DA and DR, respectively. The DA and DR hike would have cost the exchequer Rs 37,530 crore in the current financial year and 2021-22, according to a report in Livemint .
The finance ministry had recently clarified that it is not making any cuts in central government pensions as salaries and pensions will not be affected by government cash management instructions.