In a welcome relief to Central government employees, the Cabinet on Friday approved an eight percentage point increase in dearness allowance over the existing rate of 27 per cent of the basic pay. Pensioners will also get the same benefit through a hike in dearness relief (DR).

The additional instalment of DA/DR would be released with effect from January 1, 2010 to compensate the employees and pensioners for price rise, it was decided at the meeting chaired by Prime Minister Manmohan Singh.

Information and Broadcasting Minister Ambika Soni said the hike was in keeping with the accepted formula based on the Sixth Pay Commission recommendations.

The revision of the DA and DR would cost the exchequer an additional Rs. 6,969.36 crore a year and Rs. 8,131.20 crore for the 14 months from January 2010 to February 2011, an official statement said.

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