Ahead of the festive season, the central government on Thursday raised Dearness Allowance (DA) by 10 percentage points to 45 per cent of basic pay, benefiting about 88 lakh employees and pensioners.
The decision to provide higher DA to employees will cost the exchequer an additional Rs 9,303.2 crore per annum, an official spokesperson said after a meeting of the Union Cabinet, where it was decided to raise the allowance.
The new DA will be paid to central government employees and pensioners with effect from July 1, 2010, and the burden during the current fiscal has been estimated at Rs 6,202.1 crore.
"Increase in DA is in accordance with the formula based on the recommendations of the Sixth Pay Commission," the spokesperson added.
The existing rate of DA, which is paid as percentage of basic pay to compensate employees for the rising cost of living, is 35 per cent.
Inflation stood at 8.5 per cent in August, while food inflation is hovering above 15 per cent, according to the new WPI indices.
The increase in DA comes ahead of the Dussehra and Diwali festivals in October and November, respectively. The decision will benefit about 50 lakh central government employees and about 38 lakh pensioners.