Just days ahead of the announcement of the Lok Sabha elections, the Union Cabinet on Friday increased the dearness allowance (DA) of Union government employees and dearness relief (DR) of pensioners by 10 per cent of the basic pay, taking the rate to 100 per cent.
It fixed the minimum monthly pension paid by the Employees Provident Fund Organisation at Rs. 1,000. The new rate, effective from April 1, is expected to benefit 28 lakh pensioners.
The Cabinet approved the terms of reference for the Seventh Pay Commission set up to suggest wage and allowance revision.
The increased DA and DR, which will benefit 50 lakh employees and 30 lakh pensioners and family pensioners, will be given with retrospective effect from January 1 in cash, but not before the disbursement of March salary. The decision to increase the amount will cost Rs. 11,074.8 crore a year and Rs. 12,920.6 crore for 14 months from January 2014 to February 2015).
The government had announced a hike of 10 per cent to 90 per cent in September last year, effective from July 1, 2013.
The new hike in DA would be effective from the January 1 this year.
As per practice, the government uses Consumer Price Index- Industrial Workers data of the past 12 months to arrive at a quantum for the purpose of any DA hike. Thus, the retail inflation for industrial workers between January 1 to December 31, 2013 was used to take a final call on the matter.
According to the provisional data released by government on January 31, the retail inflation for factory workers in December was 9.13 per cent. The revised retail inflation data for December is scheduled to be released on Friday.
An official had said earlier that the preliminary assessment suggests that DA hike will not be less than 10 per cent and would be effective from January 1.
The government also approved the implementation of 1997 pay scale along with increase in the retirement age from 58 to 60 for the employees of Hindustan Machine Tools Limited (HMT).
The cabinet also approved a soft loan of Rs 200 crore for paying salaries to employees of loss-making PSU Indian Telephone Industries (ITI) Ltd.