In a decision that will benefit over one crore Central government employees and pensioners, the Union Cabinet on Wednesday increased Dearness Allowance (DA) by 6 per cent to 125 per cent of their basic pay with effect from January.
“The Cabinet meeting, chaired by Prime Minister Narendra Modi, has approved release of an additional instalment of DA to Central government employees and Dearness Relief to pensioners with effect from 01.01.2016. This represents an increase of 6 per cent over the existing rate of 119 per cent of the basic pay/pension, to compensate for price rise,” an official release said.
The decision will cost the exchequer Rs. 14,724.74 crore a year. Of this, Rs. 6,795.5 crore will go towards Central government employees and Rs. 7,929.24 crore towards pensioners during 2016-17.
“The increase in DA is a good Holi gift to the Central government employees…The decision will benefit about 50 lakh employees and 58 lakh pensioners,” Union Minister Ravi Shankar Prasad said after the Cabinet meeting.
DA is paid as a proportion of basic pay to mitigate the impact of inflation, while pensioners get dearness relief (DR).
The increase was in accordance with the formula based on the Sixth Central Pay Commission’s report.
Increase as per pay panel recommendations
“The Cabinet meeting, chaired by Prime Minister Narendra Modi, has approved release of an additional instalment of DA to Central government employees and Dearness Relief to pensioners with effect from 01.01.2016. This represents an increase of 6 per cent over the existing rate of 119 per cent of the basic pay/pension, to compensate for price rise,” an official release said.
The government had earlier increased the DA by 6 per cent to 113 per cent in April last year and then to 119 per cent in September.
“The Government has announced a 6 per cent hike in DA. If CPI is 5.2 per cent and the WPI negative, this hike is excessive. The burden would be on the rest of the taxpayers,” said Sandip Sabharwal, former fund manager at SBI Mutual Fund and ex-head of portfolio management services at Prabhudas Lilladher group.
“There is no clarity if these rates are only for the first three months of the year,” M. Govinda Rao, a noted economist said.
