Close on the heels of a salary increase recommended by the seventh Pay Commission and pension hike for the armed forces under the one-rank-one-pension scheme, Holi eve saw the dearness allowance (DA) of central government employees hiked by six percentage points to 125%. The Cabinet’s decision will benefit 50 lakh central government employees and 58 lakh pensioners — while the former gets DA, the pensioners are entitled to dearness relief.
“The Cabinet has decided to hike DA by 6% 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 hike, which will cost the exchequer an additional Rs 14,725 crore annually, will take effect from January 1, 2016.
The burden on exchequer will be Rs 6,795.5 core towards central government employees and Rs 7,929.24 crore towards pensioners during 2016-17.
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 on Wednesday by the Union Cabinet, chaired by Prime Minister Narendra Modi.
This represents an increase of 6 percentage points over the existing rate of 119% of the Basic Pay/Pension to compensate for price rise, said a government release.
DA is paid as a portion of basic pay of employees to neutralise the impact of inflation. The central government 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% from 113% with effect from July 1, 2015. In April last year, the government had hiked DA by 6 percentage points to 113% 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.