Around 8.8 million central government employees and pensioners came in for a double, pre-festive bonanza with the government raising their dearness allowance to 45 per cent Thursday, a day after hiking the interest rate on the provident fund by 100 basis points.
The decision to hike the dearness allowance by ten per cent was taken in an union cabinet meeting chaired by Prime Minister Manmohan Singh, said an official spokesperson.
The decision to raise the dearness allowance over the basic pay from 35 to 45 per cent to compensate the rising prices will cost the exchequer an additional Rs.9,303.2 crore per annum, the spokesperson said, adding the new allowance would come into effect from July 1, 2010.
The burden during the current fiscal has been estimated to be Rs.6,202.1 crore, she said, adding: "Increase in allowance is as per the formula based on the recommendations of the Sixth Pay Commission."
Inflation stood at 8.5 per cent in August, with food inflation hovering above 15 per cent, as per the new wholesale price index, with the base year now shifted to 2004-05 from 1993-94 and as many 241 new items added to the basket of commodities to asses the benchmark index.
The central government has over 5 million employees and around 3.8 million pensioners, said the spokesperson.
The increase in DA comes ahead of the Dussehra and Diwali festivals in October and November, respectively.