The Union Cabinet will discuss giving twin monetary benefit to about 50 lakh Central Government employees on Thursday when a proposal to hike dearness allowance by six per cent for the second time this year and amending the Bonus Act to bring more employees under the ambit will be considered.
This would be for the first time since 1999 that the government plans to hike dearness allowance of its employees by 12 per cent in a year. For the first six months of 2007, the government had already announced six per cent dearness allowance.
If the Cabinet approves the new proposal, the employees will get 41 per cent of their basic and dearness pay as the allowance. In January this year, it had gone up from 29 per cent to 35 per cent.
It was only in 1998-1999 that the government hiked dearness allowance by 16 per cent but then the next hike was of only 2.1 per cent.
Timed before the festival season, the increase would be applicable from July 1, 2007 and will cost government exchequer additional burden of about Rs 3,000 crores.
In addition to higher dearness allowance, about 35 lakh government employees may get higher bonus of Rs 1,000. This is a possibility as the government has proposed increasing in the eligibility criteria from Rs 6,500 per month salary to Rs 10,000.
While more government employees will be covered, the government also wants to increase the bonus amount from Rs 2,500 to Rs 3,500. The hike will give relief to lower level employees of the central government from the increasing inflation rate, government official said. The proposal would cost the government about Rs 2,000 crores.
The Cabinet will also consider the Labour ministry's proposal to amend the Bonus Act 1965, enabling similar bonus for private sector as applicable to the Central government employees. The proposal is in tune with the Constitutional provision of same pay for similar work. The amendment will be applicable to entire industry sector.