In a move which would benefit around 30 lakh Centre's employees and its 50 lakh pensioners including dependents, the government approved a hike in dearness allowance (DA) to 107% from the existing 100% of the basic pay to compensate for price rise.
The Union government, chaired by Prime Minister Narendra Modi, on Thursday gave its approval for the release of an additional installment of DA to general government employees and Dearness Relief (DR) to pensioners, with effect from July 1, 2014. This hike was in accordance with the accepted formula, based on the recommendations of the 6th Central Pay Commission and was worked out on the basis of 12 month average of Consumer Price Index for Industrial Workers (CPI-IW). The average rate of retail inflation for industrial workers from July 1, 2013 to June 30, 2014 was 7.25% and therefore, the central government decided to hike dearness allowance for it employees by 7%.
The previous UPA government had increased DA to 100% from 90% with effect from January 1, 2014, on February 28 on the basis of agreed formula for revision of the allowance. However, central government employees' union reportedly were not very enthused by the 7% hike in the dearness allowance as their long pending demand of merger of DA with basic pay has not been given heed by 7th Pay Commission and the government.
The combined impact on the exchequer on account of both DA and DR would be about Rs 7,691 crore per annum and Rs 5,127 crore respectively in the financial year 2014-2015 (for eight months -- July, 2014 to February, 2015.