Government on Thursday approved 7% hike in dearness allowance (DA), taking it to 107% of basic pay, a move that will benefit around 30 lakh central employees and 50 lakh pensioners including dependents.
“The Union cabinet chaired by Prime Minister Narendra Modi, on Thursday gave its approval for the release of an additional instalment of DA to general government employees and Dearness Relief (DR) to pensioners with effect from 1 July 2014. This is an increase of 7% over the existing rate of 100% of the Basic Pay/Pension, to compensate for price rise,” a press statement said in New Delhi.
The increase is in accordance with the accepted formula, which is based on the recommendations of the 6th Central Pay Commission, it said.
The combined impact on the exchequer on account of both DA and DR would be about Rs7,691 crore per annum and Rs5,127 crore respectively in the financial year 2014-2015 (for eight months — July, 2014 to February, 2015), it added.
As per the practice, the dearness allowance is worked out on the basis of 12 month average of Consumer Price Index for Industrial Workers (CPI-IW).
The average rate of retail inflation for industrial workers from 1 July 2013 to 30 June 2014 was 7.25%. Therefore, the central government decided to hike dearness allowance for it employees by 7%.
The previous UPA government had increased DA to 100% from 90% with effect from 1 January 2014 on 28 February on the basis of agreed formula for revision of the allowance.
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