Union government’s dearness allowance freeze to save Rs 11,000 crore from military

Jawans at the entry level will be set back by Rs 15,000 to 20,000 in a year

By Ajai Shukla

Business Standard, 24th Apr 20

Serving soldiers, sailors and airmen of the three defence services, and retired veterans and their families who draw pensions, will bear the brunt of the government’s decision to suspend bi-annual increases of Dearness Allowance (DA) and Dearness Relief (DR). 

The freeze on DA will affect the military’s 1.5 million serving men and women – 1.265 million in the army, 83,500 in the navy and 155,000 in the air force.

Meanwhile, the freeze on DR will affect 2.59 million military pensioners and about 600,000 civilians drawing defence pensions. The decision does not violate the “one rank, one pension” principle because pensions have been frozen across the board.

With the defence budget for 2020-21 allocating Rs 142,292 crore for salaries and Rs 133,825 crore for pensions, the suspension of DA/DR increases will save at least Rs 11,000 crore over a year. The savings could be as much as Rs 13,000-14,000 if inflation rises sharply. 

Serving defence employees are entitled to a DA increase twice each year to compensate for inflation, as measured by the Consumer Price Index (CPI). The increase is announced by the Finance Ministry’s Department of Expenditure in March and September each year, as a percentage of each employee’s salary. The increase is actually disbursed with effect from the following July and January respectively.

Those drawing defence pensions are entitled to DR, which is also raised bi-annually, in tandem with the CPI.

In September 2019, the Finance Ministry had announced a rise of 4 per cent in DA/DR, raising it from 17 per cent of basic salary to 21 per cent. This was to be paid from January 1, 2020 onwards, but has now been retrospectively placed on hold.

The government has also placed on hold the “additional instalments of DA and DR due from July 1, 2020 and January 1, 2021.”

All defence employees have already contributed a day’s salary to the PM-CARES fund. This freeze on salaries, however, will cost them significantly more – about Rs 15,000 to Rs 20,000 in a year for an entry-level soldier, sailor or airman.