Dearness Allowance (DA) plays an essential role in the compensation structure of government employees and pensioners. It safeguards their income against inflation and rising living costs. However, due to the COVID-19 pandemic, a freeze on DA and Dearness Relief (DR) was imposed from January 2020 to June 2021. While DA hikes resumed post-July 2021, the arrears for those 18 months remain unpaid, leading to widespread demand for compensation.
The cumulative loss of income has affected over 113 lakh individuals, including both central government employees and pensioners. With the economy gradually stabilizing and inflation rising once again, the push for DA arrears payment has become more prominent in 2025.
The Origin of DA Arrears and Missed Increments
The DA freeze was officially declared in April 2020, halting all DA/DR hikes scheduled for the three subsequent review periods. As per normal timelines, increases would have been implemented in January 2020, July 2020, and January 2021. Although these hikes were approved retrospectively in 2021, the arrears for the interim months were not granted.
The total DA percentage increase that was missed includes:
- 4% from January 2020 (17% → 21%)
- 3% from July 2020 (21% → 24%)
- 4% from January 2021 (24% → 28%)
This means that an 11% hike in total was deferred, impacting monthly earnings during that 18-month window. These foregone increases are now being calculated by employees and unions as due arrears.
Sample-Based DA Arrear Estimation
To understand how these arrears affect monthly salary, consider an employee earning a basic pay of ₹50,000. The DA amount is always calculated as a percentage of this basic salary. Below is a breakdown of the potential arrears accumulated for such an employee:
| Period | DA Increase | Monthly Increase (₹) | Total for 6 Months (₹) |
|---|---|---|---|
| Jan 2020 – Jun 2020 | 4% | ₹2,000 | ₹12,000 |
| Jul 2020 – Dec 2020 | 3% (total 7%) | ₹3,500 | ₹21,000 |
| Jan 2021 – Jun 2021 | 4% (total 11%) | ₹5,500 | ₹33,000 |
| Total Arrears | 11% | ₹66,000 |
This scenario offers a benchmark for similar calculations. Higher or lower basic pay will proportionally adjust the total amount due. Pensioners, who receive DR instead of DA, also face similar losses based on their pension value.
Government’s Stand and Budgetary Concerns
The Ministry of Finance has reiterated that the DA freeze was a fiscal necessity during a time of extraordinary uncertainty. The economic hit from the pandemic led to resource reallocation toward health infrastructure, vaccines, and welfare programs. According to an earlier estimate, paying the arrears could cost the exchequer ₹34,000 crore, a sum the government deemed unaffordable during that period.
While the Finance Ministry has not announced any decision to release the pending arrears, it has resumed normal DA hikes. Employees received a jump to 28% in July 2021, and the rate has since reached 50% as of January 2025. A further 4% hike to 54% is expected in July 2025, which would mark a significant increase in monthly salaries, although it still does not address the pending 18-month dues.
Variation in Arrears by Pay Levels and Designations
Given that the basic salary varies across government levels, the arrears too differ significantly. Here is a table that estimates the arrears for different levels of government employees under the 7th Pay Commission framework:
| Pay Matrix Level | Basic Pay Range (₹) | Estimated Arrears Range (₹) |
|---|---|---|
| Level 1 | 18,000 – 56,900 | ₹11,880 – ₹37,554 |
| Level 4 | 25,500 – 81,100 | ₹16,830 – ₹53,526 |
| Level 7 | 44,900 – 1,42,400 | ₹29,574 – ₹93,996 |
| Level 10 | 56,100 – 1,77,500 | ₹36,960 – ₹1,16,850 |
| Level 14 | 1,44,200 – 2,18,200 | ₹94,172 – ₹1,42,758 |
These estimates include 11% DA increase applied to 18 months of basic pay and are calculated without additional allowances or perks.
Growing Demands and Union Pressure
Central government employees, pensioners, and various staff associations have persistently voiced the need for a resolution. Organizations like the National Council (Staff Side), JCM have raised the issue in multiple meetings with Department of Personnel and Training (DoPT) and the Ministry of Finance.
- Full arrears for all 18 months, not a reduced or symbolic amount.
- Installment-based payment, if not feasible as a lump-sum.
- Consideration for pensioners, especially those in the lower pay brackets.
Union leaders argue that employees continued working during the pandemic, even under unsafe conditions, and are thus rightfully owed these dues.
Broader Financial and Social Implications
Paying the DA arrears would have a twofold benefit. For employees, it would provide a much-needed liquidity boost, helping them with debts, EMIs, or essential expenses. For the government, it could foster goodwill ahead of the 2026 general elections, especially among middle-class voters and public sector workers.
- Economic Stimulus – Improved consumption and spending.
- Social Equity – Fair compensation for services rendered during crisis.
- Political Advantage – Employee satisfaction and positive voter sentiment.
On the other hand, any such decision must be balanced against fiscal deficit targets and resource availability.
What Lies Ahead? Possible Payment Models in Discussion
While the government has not formally committed to paying the arrears, discussions within bureaucratic and policy circles point to the possibility of alternative payment models.
- A lump-sum payment in the next fiscal year
- Disbursal in three equal installments during FY 2025–26
- Partial relief for employees below a certain pay level
- Tax concessions on arrears to reduce net burden
All these scenarios will depend on budget space and the recommendations from committees handling employee benefits.
Awaiting the Government’s Final Call
The question of DA arrears continues to remain open, though it has gained renewed visibility in 2025. With inflation rising and a growing fiscal base, the feasibility of payment has improved, making it a matter of political will rather than just financial capability.
Whether the arrears will be paid in full, partially, or not at all remains to be seen. For now, employees and pensioners are watching every announcement and hoping that long-awaited relief will finally arrive.