2% DA APPROVED BY CABINET

NEW DELHI: The Centre on Wednesday increased dearness allowance and dearness relief to 4 per cent from the existing 2 per cent from January 1, 2017, benefiting 48.85 employees and 55.51 lakh pensioners.

"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 said.

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.

This hike in DA/DR will benefit 48.85 lakh central government employees and 55.51 lakh pensioners, it said.

The statement said 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).

Dearness allowance and dearness relief are provided to employees and pensioners to neutralise the impact of inflation on their earnings. The labour unions, however, are not happy with the proposed hike saying it would not be able to offset the real impact of price rise.

As per an agreed upon formula, the Centre hikes the allowance taking 12-month average of retail inflation. The government does not consider the price rise rate beyond a decimal point for deciding the rate of the dearness allowance.

The dearness allowance is paid as proportion of the basic pay of the central government employees.

Earlier last year, the government hiked DA 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.

(With inputs from agencies)