The Union cabinet on Wednesday increased the dearness allowance (DA) and dearness relief (DR) for 11.4 million central government employees and pensioners to 28% of basic pay from 17% effective prospectively from 1 July.
However, three instalments of DA and DR held back from last year will not be paid at the new rate, despite a demand by central government staff.
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The three additional instalments of DA to central government employees and DR to pensioners, which were due from 1 January 2020 till June 2021, were frozen in April, just a month after the cabinet approved a hike to 21% of basic pay from 17%.
The government said this was because the pandemic had put central government finances under stress.
On Wednesday, it said the decision to defer the three instalments for 18 months saved the Centre ？37,530 crore and helped it create fiscal space to build a ？1.2 trillion war chest to combat the coronavirus pandemic and for the stimulus spending needed to revive a stalled economy.
State governments saved an additional ？82,566 crore by freezing the payments, according to the Union government’s estimate, freeing up funds to fight the outbreak.
Information and broadcasting minister Anurag Thakur told reporters on Wednesday that DA and DR from 1 January 2020 to 31 June 2021 shall remain 17%, signalling that no arrears will be paid for the 18-month period. Thakur said the DA hike will cost the exchequer ？34,400 crore annually.
“The DA/DR hike amount is substantial and will give a boost to consumption even if 20% is saved. Fiscal deficit will increase marginally, maximum 0.1% of GDP," said Madan Sabnavis, chief economist at Care Ratings.
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Several employees’ unions, including central secretariat workers, teachers and corporation workers, wrote to Prime Minister Narendra Modi earlier this month, seeking restoration of DA and DR. They said given the high food and fuel prices, their dues should be settled.
Separately, the cabinet also approved the continuation of Rebate of State and Central Taxes and Levies (RoSCTL) with the same rates as notified by the textiles ministry on exports of apparel/garments and made-ups by excluding such items from the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme which is still in the works. The scheme will continue till 31 March 2024.
“Continuation of RoSCTL for apparel/garments and made-ups is expected to make these products globally competitive by rebating all embedded taxes/levies, which are currently not being rebated under any other mechanism. It will ensure a stable and predictable policy regime and provide a level playing field to Indian textiles exporters. Further, it will promote startups and entrepreneurs to export and ensure the creation of lakhs of jobs," the cabinet secretariat said in a statement.
Apparel Export Promotion Council (AEPC) chairman A Sakthivel said the scheme will prove to be a major strategic decision towards generating new employment, particularly for the vulnerable sections, including semi-skilled, rural youth, migrants and women in the MSME segment.
“The scheme will help check the declining trend being witnessed in apparel exports. India’s apparel exports have been losing market share to competitors, falling 20.8% in one year to $12.3 billion in FY21. The scheme is all set to reverse the trend," he added.
The Cabinet Committee on Economic Affairs approved the implementation of a special livestock sector package by revising and realigning various components of central government schemes for the next five years starting from FY22 to further boost growth in the livestock sector and thereby making animal husbandry more remunerative to 100 million farmers engaged in the sector. This package envisages the central government’s support, amounting to ？9,800 crore over a period of five years for leveraging investments of ？54,618 crore.
In order to achieve self-reliance in the shipping sector, the cabinet also approved a scheme to provide ？1,624 crore over five years as a subsidy to Indian shipping companies in global tenders floated by ministries and central public sector enterprises for the import of government cargo.
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