Ahead of the festive season, the Central government will this month announce a hike in dearness allowance (DA) to 90% from the existing 80%, benefiting nearly 50 lakh central employees and 3 lakh pensioners, according to official sources.
According to officials privy to the developments, the DA hike will be 10% and effective from July 1, this year.
The sources further said the exact amount of DA, as a proportion of basic pay, works out to over 90% after factoring in the revised All-India Consumer Price Index for Industrial Workers (CPI-IW) for June.
According to revised data released on August 30, retail inflation for factory workers for June stood at 11.63%, higher than the provisional estimate of 11.06% for the month released on July 31.
Sources said since the revised estimate for the month of June was available, the finance ministry would soon prepare a proposal for the purpose for seeking Union Cabinet nod.
They further said the proposal would be moved this month.
There would be a double-digit hike in DA after about three years.
It was last in September, 2010, that the government had announced a hike of 10% to be given with effect from July 1, 2010.
DA was hiked to 80% from 72% in April 2013, effective from January 1, this year.
As per practice, the government uses CPI-IW data for past 12 months or a year to arrive at a number for the purpose of any DA hike. Thus, the retail inflation for industrial workers between July 2012 and June 2013 will be used to take a final decision.