In response to Lok Sabha Unstarred Question No. 172 answered on 3rd February 2025, the government reiterated its decision to withhold the arrears of Dearness Allowance (DA) and Dearness Relief (DR) for Central Government employees and pensioners covering the 18-month period from January 1, 2020, to June 30, 2021. The Minister of State for Finance, Shri Pankaj Chaudhary, justified this move by citing the adverse financial impact of the COVID-19 pandemic and the fiscal burden of welfare measures, which, according to the government, made the release of these arrears unfeasible. However, this decision has sparked widespread dissatisfaction among the affected employees and pensioners, particularly when examined alongside the government's extensive financial expenditures in other areas. A closer look at these expenditures reveals a glaring disparity that questions the justification for withholding DA/DR arrears.
One of the major welfare measures taken during the pandemic was the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), launched in March 2020 to provide free food grains to approximately 80 crore people. While the scheme was undoubtedly necessary to mitigate economic hardship, its financial burden on the government was substantial. Initial reports from the Press Information Bureau indicated that the expenditure on the scheme amounted to nearly Rs.2.60 lakh crore, and by December 2022, the total spending had risen to Rs.3.43 lakh crore. The government’s commitment to ensuring food security for the vulnerable sections of society was commendable, but it also raises concerns about the selective approach in prioritizing fiscal allocations, particularly when the relatively modest DA/DR arrears are being denied to employees and pensioners.
Simultaneously, Indian banks have written off a staggering Rs.10.57 lakh crore in bad loans over the past five financial years. This includes write-offs of Rs.2.09 lakh crore in FY23, Rs.1.70 lakh crore in FY24, and Rs.2.34 lakh crore in FY20. The justification often provided for these massive write-offs is that they help clean up bank balance sheets, but in reality, they represent a significant loss of public funds. These write-offs often benefit corporate defaulters at the cost of the taxpayers, further highlighting the government’s misplaced fiscal priorities.
Adding to this financial leniency towards corporate entities, in 2019, the government implemented a reduction in the corporate tax rate to 22% for domestic companies and 15% for new domestic manufacturing companies. This move, while aimed at boosting economic growth and attracting investment, resulted in an estimated revenue loss of Rs.1.45 lakh crore. Such tax concessions to corporate houses stand in stark contrast to the stringent measures imposed on government employees and pensioners, who have been denied their rightful arrears on the grounds of financial constraints. Furthermore, the Union Budget for 2025-26 introduced significant income tax cuts, raising the tax-free income threshold to Rs.12 lakh per annum. This move is expected to cost the government approximately Rs.1 trillion in revenue. While these tax reforms are designed to boost consumption and economic activity, they also reflect the government's capacity to forgo substantial revenue to achieve policy objectives.
The decision to freeze DA and DR for 18 months was projected to save the government approximately Rs.34,402.32 crore. This amount, when compared to the Rs.10.57 lakh crore in bad loans written off and the Rs.1.45 lakh crore foregone due to corporate tax cuts, appears relatively insignificant. This amount is approximately 1% of the Rs.3.43 lakh crore spent on PMGKAY, about 0.28% of the Rs.12.3 lakh crore in loan write-offs over the past decade, and roughly 2.37% of the Rs.1.45 lakh crore revenue foregone due to corporate tax cuts. This comparison raises questions about the government's fiscal priorities, particularly concerning its employees and pensioners. If the government could absorb these massive financial setbacks without adverse economic consequences, the claim that releasing DA/DR arrears would harm the nation's fiscal health seems unconvincing.
The refusal to release these arrears is not just an economic issue but also a question of fairness. Central Government employees and pensioners served the nation through the pandemic, often working under challenging conditions. Releasing the DA/DR arrears would not only provide financial relief to them but also boost consumer spending, thereby stimulating economic activity. Denying them their rightful dues while allowing corporate tax cuts and loan write-offs creates a perception of fiscal discrimination.
While maintaining fiscal discipline is crucial, it is equally important to ensure that government policies are just and equitable. The decision to withhold DA/DR arrears, despite the government’s willingness to incur significant financial losses elsewhere, disproportionately affects government employees and pensioners. Given the relatively minor fiscal impact of releasing the arrears in comparison to other financial commitments, the government should reconsider its stance. Doing so would not only reinforce trust among its employees but also contribute positively to the broader economy.
(The author is a Service Union Representative and a Columnist. Mobile: 9437022669, eMail: samalbruhaspati@gmail.com)
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