The Indian government cut its expenditure on the government employees citing the financial situation amid the coronavirus pandemic. Indian government held three months’ dearness allowance of its employees.
Dearness Allowance Put on Hold
The Ministry of Finance announced a freeze on Dearness Allowance payable to central government employees and Dearness Relief to central government pensioners due from 1st January 2020. The decision will affect around 49.26 lakh central government employees and 61.17 lakh pensioners. However, the government will continue to pay the current rate of DA and DR, which is 17%.
Further, it announced the restoration of the rates of DA and DR as effective from January 2020, July 2020, and January 2021. It will be accordingly subsumed in the cumulative revised rate effective from 1 July 2021. However, the government will not pay any arrears for the period from 1 January 2020 to 30 June 2021.
Other Cuts in Expenditure
The government has already cut salaries of ministers, PM, President, and members of parliament by 30%. Besides, it has suspended Members of Parliament Local Area Development Scheme for two years, saving around Rs 8,000 crore. A government official stated that deferment of three instalments of DA/DR would add around ₹37,530 crores to the exchequer.
Also, States’ will save approximately ₹82,566 crores by freezing the payments, making a total of ₹1.2 trillion to fight against the pandemic. Dearness Allowance is inflation-linked compensation to employees for an increase in the cost of living, revised twice every year (January 1st and July 1st). The government ordered a hike of 4% in DA in March to 21%.
The Indian Public Service Employees Federation (IPSEF) criticised the move. General secretary of IPSEF stated that the freeze in DA/DR would eventually decrease consumption. Also, the government must not take away the entitlement of its employees as they have already contributed to the PM CARE fund. However, the government clarified that it is not making any pay cuts.
In all, it is a necessary move as the government’s finances is under pressure due to the pandemic.