Dearness Allowance hike: From DA merger to inflation adjustment — Here are top 5 demands from employee groups

The central government hiked dearness allowance (DA) by 2% in April, effectively taking the component to 60% of the basic pay for central government employees and pensioners, up from 58%. Revised twice a year based on the All-India Consumer Price Index (AICPI) formula as prescribed under the 7th central pay commission, DA aims to address rising cost-of-living due to inflation.

It impacts the monthly pay of central government employees, public sector staff, defence personnel, bank employees and retired pensioners aimed at mitigating rising inflation. Announcements are usually made in March and October, with rollouts scheduled in January and July. Notably, DA is not part of compensation for private sector workers.

Part of an employee's cost-to-company (CTC) and credited as part of the monthly salary / pension payout, it seeks to offset inflation and maintain purchasing power.

Close to 50 lakh central government employees and nearly 65 lakh retired central government pensioners, including defence personnel and retirees, will benefit from a DA hike across 18 employee levels.

Top 5 DA demands from prominent employee groups

Today we take a look at the top 5 DA related demands made by central government employee and pensioners' representative groups, unions and stakeholders. They collectively represent a large number of employees and pensioners, including defence and railway staff.

Suggestions made by these groups are expected to play an important role in shaping the 8th pay commission's deliberations before it announces its final recommendations. Notably, the 8th CPC closed the memorandum submission window last month on 15 June, after it opened the process on 5 March.

• The All India Defence Employees Federation (AIDEF) is seeking inflation-adjusted compensation demands. It has also suggested that minimum pay be hiked to ₹69,000 per month.
• The Maharashtra Old Pension Organisation has suggested minimum DA hike of 4% and DA merger at 50%. It has also suggested that minimum pay be hiked to ₹65,000 per month.
• The National Council – Joint Consultative Machinery (NC-JCM) has demanded that DA be updated into an inflation-linked wage model. It has also suggested that minimum pay be hiked to ₹69,000 per month, from the current ₹18,000.

• Multiple employee unions and representative groups have demanded that the Centre make an official announcement on DA merger. This is because the 7th CPC stipulated that DA may be merged with basic salary if it exceeds 50% and as of the last update, the component now comprises 60% of basic pay.
• The AIDEF in a second memorandum submitted to the 8th CPC also sought a change in how DA is calculated. It argued that the current formula assigns higher weightage to relatively stable expenditure categories, while employees, especially those on lower pay grades, spend a larger percentage of their salary on food, education, healthcare, house rent, medicines and other essentials.

Why DA increase is a significant demand?

The Railways Senior Citizens Welfare Society (RSCWS) in its submission said that DA only provides partial protection against erosion of real wages due to inflation and over time the gap between periodic pay revisions and continuously rising cost of living impacts purchasing power significantly.

It also called growth in basic pay inadequate because the existing structure places significant reliance on allowances and DA rather than strengthening the core element of salary — basic pay. “Since pension and retirement benefits are linked to basic pay, the inadequate growth adversely affects long-term financial security of retirees,” it stated.

Notably, the government has not officially announced a DA merger (which would expand basic pay) as of June 2026, the issue has gained traction because basic salary determines other components of compensation i.e. provident fund contribution, pension, allowances, gratuity, and more. Thus, higher DA and by association basic pay means increase in overall salary and linked allowances.