Providing relief to 50 lakh central employees and 58 lakh pensioners from rising prices, the government on Wednesday decided to hike Dearness Allowance by 6 per cent to 125 per cent of the basic pay.
"Cabinet has decided to hike DA by 6 per cent for central government employees and pensioners," Telecom Minister Ravi Shankar Prasad said while briefing the media on decisions taken by the Union Cabinet on the eve of Holi festival.
The combined impact on the exchequer on account of both DA and Dearness Relief would be of Rs 6,796.50 crore per annum and Rs 7,929.24 crore respectively, in 2016-17 (for a period of 14 months from January, 2016 to February, 2017), he said.
The decision to release an additional instalment of DA to central government employees and Dearness Relief (DR) to Pensioners from January 1, 2016, was taken here today by Union Cabinet, chaired by Prime Minister Narendra Modi.
This represents an increase of 6 percentage points over the existing rate of 119 percent of the Basic Pay/Pension, to compensate for price rise, said a government release.
The DA, which will benefit 50 lakh central government employees and 58 lakh pensioners, will go up from the existing 119 per cent to 125 per cent, it said.
Dearness Allowance is paid as a portion of basic pay of employees to neutralise the impact of inflation. Pensioners get Dearness Relief.
The Centre revises DA twice a year on the basis of one year average of retail inflation for industrial workers as per a pre-determined formula.
In September last year, DA was increased to 119 per cent from 113 per cent with effect from July 1, 2015.
In April last year, the government had hiked DA by 6 percentage points to 113 per cent of the basic pay with effect from January 1, 2015.
The increase is in accordance with the accepted formula, which is based on the recommendations of the 6th Central Pay Commission (CPC), the statement said.