The government on Friday approved a proposal to hike dearness allowance (DA) to 90% from the existing 80%, a move that is expected to benefit at least 50 lakh central government employees and 30 lakh pensioners.
The hike will be effective from July 1 this year, a source said, adding the increase in DA to 90% would result in an additional annual expenditure of Rs 10,879 crore.
There would be an additional burden of Rs 6,297 crore on the exchequer during 2013-14.
This is a double digit hike in DA after about three years. It was in September 2010 that the government had announced a hike of 10% to be given with effect from July 1, 2010.
The DA was hiked to 80% from 72% in April 2013, effective from January 1, this year. As per the practice, the government uses CPI-IW data for past 12 months to arrive at a number for the purpose of any DA hike.
The retail inflation for industrial workers between July, 2012 and June 2013 was used to compute the increase in the DA.