The over four-million central government employees will go home with an increased pay packet from now, with the union cabinet on Friday hiking the
dearness allowance to 65 per cent of the basic salary from the existing 58 per cent with retrospective effect from January 1 this year.
The hike, about 7 per cent from the present rates, will also be applicable to central government pensioners.
The increase in the allowances will cost the government exchequer Rs 7,474.53 crore annually, according to the decision taken at the cabinet meeting presided by Prime Minister Manmohan Singh in New Delhi.
For the 14-month period beginning January 2012 to February 2013, the hike will produce a bill of Rs.8,720.32 crore
"The union cabinet today (Friday) gave its approval to release an additional instalment of dearness allowance (DA) to central government employees and dearness relief (DR) to pensioners with effect from Jan 1, 2012, representing an increase of seven percent over the existing rate of 58 percent of the basic pay/pension, to compensate for price rise," a release said after the meeting.
The increase is in accordance with the accepted formula, which is based on the recommendations of the Sixth Central Pay Commission.
"The combined impact on the exchequer on account of both dearness allowance and dearness relief would be of the order of Rs.7474.53 crore annually and Rs.8720.32 crore in the financial year 2012-13 (for a period of 14 months from January 2012 to February 2013)," it said.
