7th pay commission: DA hike to be at least 4%; here's what you need to know

The Central government has hiked the variable Dearness Allowance (VDA) for central government employees from Rs 105 per month to Rs 210 per month amid the second COVID-19 wave.

The increase is effective from April 1, 2021, and will lead to an increase in the minimum wage. This hike will benefit 1.5 crore government workers including casual and contractual workers.

Meanwhile, the hike in full dearness allowance (DA) for central government employees is likely to be announced on July 1, 2021. The DA hike is likely to be at least 4 per cent of the basic salary of a central government employee.

Union Minister of State for Parliament Anurag Thakur said in a written reply to the Rajya Sabha, "As and when the decision to release the future installments of Dearness Allowance due from 01.07.2021 is taken, the rates of DA as effective from 01.01.2020, 01.07.2020 and 01.01.2021 will be restored prospectively and will be subsumed in the cumulative revised rates effective from 01.07.2021."

Central government employees get a DA of 17 per cent at present. This became effective from July 2019 with further revision being due from January 2020. Further hikes in DA were withheld due to the coronavirus pandemic.

Also read: 7th Pay Commission: Deadline for performance report of central govt employees extended

In the wake of the coronavirus pandemic, the government had suspended the disbursement of DA at increased rates along with DR for pensioners. Suspending DA hikes for one and a half years helped the government save a total of Rs 37,530.08 crore.

This amount was utilised to bolster the resources needed to mitigate the economic impact of the COVID-19 crisis and the subsequent restrictions through various stimulus measures.

Here's what you need to know about the latest DA hike announcement

What is variable dearness allowance?

Variable dearness allowance (VDA) came in place to protect central government employees' wages against inflation. In order to cushion central government employees' wages against inflation, the VDA was initially linked to the cost-of-living index.

Who will benefit from this hike?

The latest hike in variable DA is set to benefit 1.5 crore central government employees and workers. The hike is also applicable for establishments under the central government's authority, railway administration, mines, oil fields, major ports, or any corporation established by the central government. It will also apply to contract and casual employees/workers.

Also read: 7th Pay Commission: Centre likely to announce DA hike in June

How is variable DA calculated?

Variable DA is revised on the basis of the average Consumer Price Index for Industrial Workers (CPI-IW). The average CPI-IW for July-December 2020 was used to compute the latest VDA revision.

When will the hike in full DA be announced?

The full DA is likely to be hiked to at least 4 per cent of the basic salary of a central government employee. With this hike, the total DA will reach 21 per cent. The hike in full DA could be announced on July 1, 2021.

Edited by Mehak Agarwal

Also read: Govt hikes variable DA; 1.5 cr central govt employees to benefit