7th Pay Commission latest news today 2018: Dearness Allowance hike for Central government employees, more DR for pensioners

7th Pay Commission latest news today:  The Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday approved to release an additional instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners. The hike would apply with effect from 01.07.2018 (July 01, 2018), representing an increase of 2% over the existing rate of 7% of the Basic Pay/Pension, to compensate for price rise, an official statement said today. The DA and DR hike is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission.

Impact on the exchequer

The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be Rs 6112.20 crore per annum and Rs 4074.80 crore in the financial year 2018-19 (for a period of 08 months from July 2018 to February 2019).

Who will benefit

Modi government's latest decision will benefit about 48.41 lakh Central government employees and 62.03 lakh pensioners.

The Dearness Allowance (DA) is paid to Central Government employees to adjust the cost of living and to protect their Basic Pay from erosion in the real value on account of inflation. Presently, DA is based on the All India Consumer Price Index (Industrial Workers).  According to the 7th pay Commission report,  "the real pay in government is protected by providing Dearness Allowance (DA), which is that percentage of pay by which the CPI (IW)16 increases over a fixed base value...Consequently, the absolute amount of DA keeps on growing with every point increase in CPI (IW)."

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Apart from DA, the government provides house rent, transport, location and function specific allowances besides Leave Travel Allowance (LTA) which, along with the basic pay, constitute the gross pay of a government employee.

The 7th CPC report had said,"Keeping in mind that the present formulation of DA has worked well over the years, and there are no demands for its alteration, the Commission recommends continuance of the existing formula and methodology for calculating the Dearness Allowance."