The Government on Wednesday approved the proposal of increasing 2 per cent dearness allowance and dearness relief to 4 per cent. The latest move, which comes after the recommendations of the 7th Pay Commission would benefit almost 49 lakh government employees and around 56 lakh pensioners across the country.
Dearness allowance and dearness relief are provided to employees and pensioners to neutralise the impact of inflation on their earnings.
"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 mentioned.
The DA/DR has been increased by 2 per cent over the existing rate of 2 per cent of the basic pay/pension to compensate for price rise and it is in accordance with the accepted formula based on the recommendation of 7th pay commission, the statement said.
The statement further added that 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 dearness allowance is paid as proportion of the basic pay of the central government employees.
The hike in the DA/DR is as per the agreed methodology of taking average of Consumer Price Index-Industrial Workers for the past 12 months.
The Confederation of Central Government Employees had termed it as a meagre hike in view of actual rise in cost of living index saying the CPI-IW was far from reality.
The union had also said that there was a lot of variation in the rates of price rise of commodities by Ministry of Agriculture and CPI-IW.
Earlier last year, the government hiked dearness allowance by 6 per cent to 125 per cent of basic pay. The DA was later merged into the basic pay following the implementation of the 7th Pay Commission award.
At present the Central government employees and pensioners are entitled to 2 per cent dearness allowance, which was effected from July 1, 2016.