india

Updated: Apr 23, 2020 17:19 IST

The Centre on Thursday held back a revision of the dearness allowance paid to all Union government employees for 18 months and proposed a similar move by state governments to collectively save about Rs 1.20 lakh crore to fund the fight against the Covid-19 pandemic, two officials with direct knowledge of the matter said.

The department of expenditure, an arm of the finance ministry, on Thursday issued an order freezing dearness allowance (DA) payments to central government employees and dearness relief (DR) to pensioners until July 2021, citing the “ crisis arising out of Covid-19”.

“However, Dearness Allowance and Dearness Relief at current rates will continue to be paid,” the order said.

DA and DR will be restored prospectively after June 30, 2021, but no arrears for the period from January 1, 2020 to June 30, 2021 shall be paid,the order said.

Thursday’s decision will save Rs 37,530 crore, the officials mentioned above said, requesting anonymity. To fund the increasing expenditure on Covid-19 testing and treatment, and social spending, amid a decline in revenue caused by the lockdown enforced to stop the virus’s spread, the central government has put in place several austerity measures including a 30% cut in the salaries of ministers and MPs, and suspension of the Members of Parliament Local Area Development Scheme (MPLADS).

President Ram Nath Kovind and Vice President M Venkaiah Naidu had opted for pay cuts soon after.State governments have also ordered pay cuts to trim spending.

The Union government is separately working on a similar proposal for the state government employees that would save about Rs 82,566 crore. “Normally state governments follow the Central government’s order on DA and DR at a time when a major increase on health and welfare expenditure is anticipated,” one of the officials cited above said.

A senior official in Bihar government said requesting anonymity, “Cash-strapped states have no option but to follow the directive of the Centre. But, some states may give DA to their staff if they have surplus funds. Normally, states follow the Centre’s template on this matter.”

The Union cabinet had last month decided to raise the dearness allowance (DA) by 4 percentage points, from the existing 17% to 21% of basic pay or pension of employees to compensate for a price rise.

But formal orders on the DA increase weren’t issued after Prime Minister Narendra Modi ordered the national lockdown within a fortnight of the cabinet’s decision.

The Centre is also considering cutting one day’s salary of its staff every month for 12 months

The government announced a Rs 1.7 lakh crore welfare package on March 26 to provide immediate relief to the poor because of the lockdown. While the government will continue to provide required help to farmers, daily wagers, and micro and small industries, it will also take some regulatory and fiscal measures to boost the economy and that would require a vast amount of money, the two officials mentioned above said.

According to industry estimates, a Rs 16 lakh crore economic stimulus package, inclusive of the Rs 1.7 lakh crore already announced, is needed to boost the economy so that millions of jobs and livelihoods are protected.