In a bid to provide relief from high inflation, the government on Tuesday increased dearness allowance (DA) by 6 per cent to 51 per cent, benefiting over 50 lakh Central government employees and 38 lakh pensioners.
"The decision to hike DA was taken by the Union Cabinet at its meeting here," a Union minister said.
The combined impact of the hike will be Rs 5,715.90 crores per annum. However in the next financial year, the burden on the exchequer would be Rs 6,668.52 crores after the additional 6 per cent DA payout is factored in from January 1 to March 31, 2011.
The increased DA, which will be effective from January 1, is provided to government staff and pensioners to compensate them for rising prices.
Presently, the DA is paid at 45 per cent of basic pay. The increase in DA by 6 per cent would be in accordance with the formula prescribed by the Sixth Pay Commission for central government employees.
The decision will provide direct relief to around 50 lakh employees and 38 lakh pensioners.
The DA is revised twice a year, on January 1 and July 1.
The relief came amid high retail prices, as inflation has been ruling above 9 per cent.
The consumer price index (Industrial Workers), which is the basis for revising dearness allowance, was 9.47 per cent in December and 9.30 per cent in January.
Headline inflation, based on movement in wholesale prices, was 8.31 per cent in February, much above the comfort level of 5-6 per cent. Food inflation, too, was hovering above 9 per cent.