New Delhi: The Union Cabinet on Wednesday cleared a proposal to increase dearness allowance and dearness relief by 2 percent to 4 percent, which will potentially benefit over one crore central government employees and pensioners.
"The Union Cabinet chaired by Prime Minister Narendra Modi has approved release of an additional instalment of dearness allowance to central government employees and dearness relief to pensioner with effect from January 1, 2017," an official statement said.
This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission.
The combined impact on the exchequer on account of both dearness allowance and dearness relief would be Rs 5,857.28 crore per annum and Rs 6,833.50 crore in the financial year 2017-18 (for a period of 14 months from January, 2017 to February, 2018), the statement said.
This will benefit about 48.85 lakh central government employees and 55.51 lakh pensioners.
Dearness allowance and dearness relief are provided to employees and pensioners to neutralise the impact of inflation on their earnings. The labour unions, however, are not happy with the hike saying it would not be able to offset the real impact of price rise.
As per an agreed upon formula, the Centre hikes the allowance taking 12-month average of retail inflation. The government does not consider the price rise rate beyond a decimal point for deciding the rate of the dearness allowance.
The dearness allowance is paid as proportion of the basic pay of the central government employees.
Earlier last year, the government hiked DA by 6 percent to 125 percent of basic pay. The DA was later merged into the basic pay following the implementation of the 7th Pay Commission award.
