Employers in the public sector pay salaries to their employees which is divided into various components. One of these components is the Dearness Allowance. Introduced in the World War II, Dearness Allowance or DA was initially known as ‘Dear Food Allowance’. In the initial years, Dearness Allowance was provided to employees by the government as a demand for wage revision was raised. However, later it was linked to the Consumer Price Index. There have been attempts to revise and restructure the percentage of Dearness Allowance by a number of committees in the Central Government.
Payment of dearness allowances becomes even more significant in a country like India, because of the subdivision of various Indian states into villages, towns and cities. This component of the salary takes care of the change in the cost of living, which is highly dependent upon the location of the employee. Especially for government sector employees, job transfers are common and an essential feature. Therefore, dearness allowance becomes all the more significant so as to hedge the inflation cost of living difference and the increasing rate of inflation.