In the crucial year before 2014 polls, around 50 lakh central government employees and 30 lakh pensioners are expected to get 8% dearness allowance (DA), highest in the last couple of years The Union Cabinet on Tue-sday is expected to take a call to increase the allowance to be effective from January 1, 2013.
The increase in the allowance is expected to cost the government around 5,200 crore and it would mean that dearness allowance would be 80% of the basic pay. Any change in the allowance is linked with consumer price index and is done once every six months.
The last increase in dearness allowance was in September was 7% preceded by a 6% increase. The proposal has wider ramifications as the state governments normally adopt the Central increase in dearness allowance for its employees.
As per the practice, the DA is merged with basic pay when it breaches the 50% cap. This helps employees get higher allowances as those are paid as proportion of the basic pay.