The central government today came out with a festival bonanza by declaring an additional 5 per cent dearness allowance (DA) for its over eight million employees and approving two interest subsidy schemes for farmers and home buyers.
The additional DA will cost the exchequer Rs 2,900 crore this fiscal and Rs 4,355 crore in a full year. The decision to hike the DA for the employees and dearness relief for pensioners just before the festive season, taken at a Cabinet meeting today, will create additional demand and boost the economy, which is being impacted by an erratic monsoon.
The additional DA, to be given with effect from July 1 this year, will help the employees and retired people weather the impact of rising prices. “The Cabinet has decided to release an additional installment of DA to central government employees and DA to pensioners...representing an increase of 5 per cent over the existing rate of 22 per cent of the basic pay, pension to compensate for price rise,” Information and Broadcasting Minister Ambika Soni told reporters after the Cabinet meeting.
DA is linked to the consumer price index for industrial workers, which is in double digits even as the wholesale price index remains in the negative zone for over three months.
It also decided to slash the interest subsidy given to farmers on crop loans by one percentage point to 2 per cent for this fiscal, a move that is expected to bring down burden on the central exchequer by Rs 311 crore.
According to today’s Cabinet decision, the government will pay 2 per cent interest subsidy to banks, against 3 per cent in the last fiscal, for granting short-term crop loan to farmers at a concessional rate of 7 per cent. The subvention is available for crop loans up to Rs 3 lakh for one year and will be given to public sector banks, regional rural banks (RRBs) and cooperative credit institutions (CCIs) on their lending as well as to Nabard for refinancing RRBs and CCIs.
The financial implication due to the interest subsidy on farm loans would be Rs 4,000 crore this fiscal, against Rs 4,311 crore in 2008-09, Soni said. However, farmers, who have been paying back their credit promptly, would continue to get loans at 6 per cent, which means an additional interest subsidy of 1 per cent.
| OTHER DECISIONS |
| * To preserve the heritage character of the North and South Blocks, which house key offices, including PMO, the govt decided any alterations or repair work at these buildings should be done only with the permission of a special panel |
| * Centre would launch an annual health survey in some states to provide feedback on the impact of schemes under the National Rural Health Mission on health indicators like Maternal Mortality Rates and Total Fertility Rates |
| * The govt extended the in-principle approval given to setting up of 6 National Institutes of Pharmaceutical Education and Research — at Ahmedabad, Hyderabad, Hajipur, Rae Bareilly, Kolkata and Guwahati — for 2 more years |
| * The govt today decided to hand over the management control of 3 sick units — Orissa Mineral Development Corporation, Bisra Stone Lime Co and Eastern Investments Ltd — to Rashtriya Ispat Nigam Ltd |
| * Cabinet approved amendments to the Indian Medicine Central Council Act, 1970, which would grant recognition to ‘Sowa-Rigpa’, a traditional system of medicine practised in the hilly regions of the country |
| * The govt allocated Rs 1,473 crore to the Cotton Corporation of India for losses incurred due to procurement of cotton at the minimum support price. This will ensure remunerative returns to cotton growers without quantitative restriction |
| * The government decided to extend the rehabilitation package to the victims of the 1984 anti-Sikh riots to the left out states and Union Territories. An outlay of Rs 714.76 crore has been earmarked for this |
In a separate scheme approved today, home loan takers can save up to Rs 10,000 on their monthly repayments for one year. Aimed at promoting low-cost housing, the subsidy will be available for loans up to Rs 10 lakh, provided the cost of the dwelling unit does not exceed Rs 20 lakh, Soni said. “It is expected that the cut in interest rates should reduce the equated monthly installments of borrowers and create additional demand for housing, particularly in the low-cost category,” she said, adding the scheme would cost the exchequer Rs 1,000 crore and benefit about one million borrowers.