The move comes a month after the Union Cabinet approved an increase in DA to 21 per cent.
“In view of the crisis arising out of Covid-19, it has been decided that the additional installment of DA payable to central government employees and dearness relief (DR) to central government pensioners due from January 1, 2021, shall not be paid,” said a memorandum on the website of the finance ministry’s expenditure department.
The existing rate of 17 per cent DA/DR will continue to be paid till July 1, 2021, after which the new rates will be restored “prospectively”.
This means there will be no arrears paid for the difference between 21 per cent and 17 per cent which would have accumulated from January 1, 2020, to July 1, 2021.
Finance ministry officials said there was a need to repurpose expenditure and focus on spending on health and the various welfare measures for those most affected by the pandemic and the resultant nationwide lockdown.
“The combined savings on account of freezing installments of DA/DR would be Rs 37,530 crore for 2020-21 and 2021-22. Normally, the state governments follow the central government orders on DA/DR,” according to an internal finance ministry note on the impact of the move which was not put up on the website.
“It is estimated that the freezing of DA/DR for state government employees and pensioners will be Rs 82,556 crore. Thus the total anticipated saving of the Centre and states will be Rs 1.2 trillion, which will help fight the battle against Covid-19 and its fallout,” said the note.
The Centre has so far announced a Rs 1.71-trillion package for the vulnerable sections of society which will cost the exchequer an additional Rs 1 trillion.