The hike in Dearness Allowance (DA) payable to Central government employees and Dearness Relief (DR) to pensioners due from January 1, 2020 shall not be paid, announced the Ministry of Finance on Thursday.

In view of the country’s financial situation amid the Coronavirus pandemic, government has decided to freeze payment of additional instalment of DA and DR till July 2021.

In an office memorandum, department of expenditure, ministry of finance said that additional instalment of DA and DR falling due from July 1, 2020 and January 1, 2021 will also not be paid. However, the allowance will continue to be paid at current rates.

The Central government employees will also not get any arrears in any future revision of DA/DR from July 1, 2021. However, If a decision to revise DA rates is taken for July 1, 2021 period, the rate of allowance as effective from January 1, 2020, July 1, 2020 and January 1, 2021 will be restored prospectively and will be subsumed in the cumulative revised rates effective from July 1, 2021, the office memorandum said.

Though the government did not give an estimate of how much it would save by disallowing DA revision for its employees, a four per cent raise approved by Cabinet last month meant additional expenditure of around Rs 15,000 crore. For three half yearly periods, going by this yardstick, would result in savings of close to Rs 45,000 for the Centre.

Any change in DA rates benefits about 48 lakh Central government employees and 65 lakh pensioners.

Today’s decision comes after the Union Cabinet on March 13 approved a 4 per cent hike in dearness allowance (DA) to 21 per cent for Central government employees and pensioners, costing the exchequer an additional Rs 14,595 crore.

This was over the existing rate of 17 per cent of the Basic Pay/Pension.

The hike of 4 per cent meant that the monthly salary of Central government employees’ will go up by Rs 720 to Rs 10,000 per month.

In October last year, the Union Cabinet had cleared 5 per cent hike in Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) to pensioners, increasing it from 12 per cent to 17 per cent.

The Dearness Allowance (DA) is a cost of living adjustment allowance paid to government employees, public sector employees (PSE) and pensioners. It is calculated as a percentage of an Indian citizen’s basic salary to mitigate the impact of inflation on people.

Dearness Allowance/Dearness Relief is based on the rise in inflation and increase in prices of essential commodities.

DA is announced twice in a year and its tenor is January to June and July to December every year.

The government move — finalised at yesterday’s Cabinet meet — comes as the number of Coronavirus cases in the country crossed 20,000.