The government has announced a hike in dearness allowance by 10 per cent, a move that would benefit about 50 lakh central government employees and 30 lakh pensioners.
The allowance has been increased to 90 per cent from the existing 80 per cent.
"The Union Cabinet today approved the proposal to release an additional instalment of Dearness Allowance (DA) to central government employees and Dearness Relief (DR) to pensioners with effect from July 1 2013, in cash, at the rate of 10 per cent increase over the existing rate of 80 per cent," Information and Broadcasting Minister Manish Tewari said after the Union Cabinet meeting.
DA was last hiked to 80 per cent from 72 per cent in April 2013, effective January 1 this year.
According to an official statement, the combined impact on the exchequer on account of both dearness allowance and dearness relief would be of the order of Rs 10,879.60 crore per annum and Rs 7,253.10 crore in the financial year 2013-14 (for a period of eight months from July, 2013 to February 2014).
"....the central government employees as well as the pensioners are entitled for DA/DR at the rate of 90 per cent of the basic with effect from July 1, 2013. The increase is in accordance with accepted formula based on the recommendations of the 6th Central Pay Commission," the statement added.
This is a double-digit hike in DA after about three years. It was in September 2010 that the government had last announced a hike of 10 per cent to be given with effect from July 1, 2010.
According to the practice, the government uses CPI-index data for past 12 months to arrive at a number for the purpose of any DA hike.
The retail inflation for industrial workers between July 2012 and June 2013 was used to compute the recent increase in DA.