In a bonanza of sorts ahead of the festival season and in the wake of soaring prices, the Union Cabinet on Friday approved a double-digit increase in dearness allowance to 90 per cent, benefiting 50 lakh Central government employees and 30 lakh pensioners, with effect from July 1, 2013.

“The Cabinet approved the proposal to release an additional instalment of DA to Central government employees and Dearness Relief (DR) to pensioners, in cash, at 10 per cent over the existing rate of 80 per cent,” Information and Broadcasting Minister Manish Tewari told reporters here.

An official statement said they were entitled to the hike in DA/DR at the rate of 90 per cent of the basic pay. The increase “is in accordance with the accepted formula based on the recommendations of the 6th Central Pay Commission.”

The impact on the exchequer would be about Rs. 10,879.60 crore per annum on account of DA and Rs. 7,253.10 crore on account of DR in the financial year 2013-14 (eight months from July 2013 to February 2014).

Significantly, the double-digit increase in DA has come after a gap of about three years. Since the government uses CPI-IW (Consumer Price Inflation – Industrial Workers) data for the previous 12 months to arrive at a figure for computation of any increase in DA instalment, the percentage hike is based on the retail inflation data for July 2012-June 2013.

The previous DA hike of 10 per cent was in September 2010 when the government announced an additional instalment given with effect from July 1 that year.

In April this year, the government announced DA increase from 72 to 80 per cent with effect from January 1, 2013.

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