In a good news for about 5 million central government employees, government today raised their dearness allowance (DA) by 8 per cent from the current 27 per cent of the basic salaries.
The Union Cabinet, at a meeting chaired by Prime Minister Manmohan Singh, took the decision in order to compensate them for price rise.
"The increase would be 8 per cent over the existing rate of 27 per cent of basic pay or pension," Information and Broadcasting Minister Ambika Soni told reporters here.
The increase is in accordance with the accepted formula based on the recommendations of the Sixth Central Pay Commission, she said.
Pensioners will also get the dearness relief, she said.
The additional instalment of dearness allowance would be released with effect from January this year.
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The combined impact on the exchequer on account of both dearness allowance and dearness relief would be to the tune of Rs 6,969.36 crore per annum and Rs 8,131.20 crore in 2010-11.
The DA revision is based on the consumer price index (CPI) for industrial workers, which has been showing a steep increase along with other indices of price rise.
The CPI for industrial workers increased to 16.2 per cent in January from 10.4 per cent a year ago.