In a Deepavali gift to over 50 lakh central government employees and over 58 lakh pensioners, the Centre on Thursday approved 2% dearness allowance (DA) to be paid to them with retrospective effect from July this year.
Earlier this year, the government hiked DA by 6% to 125% of the basic pay. The DA was later merged with the basic pay following implementation of the 7th Pay Commission award.
The combined impact on the exchequer on account of both dearness allowance and dearness relief will be Rs 5,622.10 crore in the financial year 2016-17, though for the period of eight months (July to February 2017), it will be Rs 3,748.06 crore, an official statement said after the Cabinet meeting chaired by Prime Minister Narendra Modi.
According to a statement, the increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Pay Commission.
About 50.68 lakh government employees and 54.24 lakh pensioners will be benefited, it said.
Dearness allowance is paid to employees and pensioners to neutralise the impact of price rise on their earnings.
The central government employee unions, however, were not satisfied with the 2% hike and instead had pressed for a 3% increase.
The unions said that the average of consumer inflation for industrial workers in the past 12 months had worked out to be close to 3%.
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