The finance ministry issued an order on Tuesday to carry out the recent Cabinet decision to increase the dearness allowance for government employees from 17% to 28% starting July 1. Because the rate of the allowance was not revised because to the pandemic, the decision will benefit approximately 48 lakh central government employees and 65 lakh pensioners. "These directives shall also apply to civilian employees paid from the Defence Services Estimates", it stated, adding that separate orders will be issued by the corresponding ministries for Armed Forces personnel and Railway employees.

Last week, the Union Cabinet had approved an 11 percentage point hike in dearness allowance and dearness relief for central government employees and pensioners, following which the new DA rate is 28 percent.

The allowance rate is generally revised twice a year in January and July but the revision was stalled owing to the pandemic. The hike of 11 per cent point comes taking into account all these revisions that were halted. The Cabinet also announced that there will be no arrear as the DA rate from January 1, 2020 to June 30, 2021 will be considered at 17 per cent, the rate at which the government employees received their DA along with their monthly salary.

Central government employees will receive the increased DA in their July salary in the starting of August. The July salary of the central government employees is likely to see a hike in house rent allowance as well, as according to an earlier order of the government, the house rent allowance would increase when the DA exceeds 25 per cent of the basic pay. The order linking the DA with the HRA was passed in 2017. Now that the DA forms 28% of the basic pay, central government employees are expecting a hike in the HRA as well, which varies from one city to another, depending in whether the residence of the central government employees fall under X,Y and Z categories.