7th Pay Commission: The government might take a decision to increase the dearness allowance of central government employees within a next few months, according to media reports. The government gives Dearness Allowance (DA) to its employees and pensioners twice a year, which gets implemented from January and July.

Dearness allowance is paid to bear the increasing cost of living. It is paid as a percentage of basic salary to adjust the cost of inflation.

Finance Minister Arun Jaitley in March 2018 announced to increase dearness allowance, which got implemented from January 2018. Dearness Allowance, which is generally applicable in July, is declared in August or September.

The central government increased the dearness allowance in March by two per cent to 7 per cent from the current level of 5 per cent. New rates were implemented from 1st January this year.

This decision was taken in a meeting chaired by the Union Cabinet headed by Prime Minister Narendra Modi. The approval benefitted 48.41 lakh employees and 61.17 pensioners of the Central Government.

Significantly, this increase of dearness allowance was according to the acceptable formula. This formula is based on the recommendation of the 7th Central Pay Commission. Last year, the Central Government had increased the dearness allowance of its employees and pensioners by one per cent to five per cent.

There have also been reports of change in the base year, which is used in the formula that is used for calculation of dearness allowance. The existing base year for calculating dearness allowance is 2001 and the last time it was revised in 2006 by the 6th Pay Commission to 2001 from 1982.

Dearness allowance for Central Government employees is calculated using the formula: Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 12 months -115.76)/115.76)*100.

The labour ministry has reportedly given the approval and it is supposed to go to the technical advisory committee, after which it will go to the national tripartite consultation.