The Union Cabinet on Friday approved 4 per cent increase in dearness allowances (DA) for government employees and pensioners to 21 per cent, which will benefit over 1.13 crore people.
The move will come into effect retrospectively from January 1, 2020.
The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved to release an additional instalment of dearness allowance (DA) to central government employees and dearness relief (DR) to pensioners with effect from January 1, 2020, an official statement said.
There will be an increase of 4 per cent over the existing rate of 17 per cent of the basic pay/pension to compensate for price rise, it added.
"The combined impact on the exchequer on account of both dearness allowance and dearness relief would be Rs 12,510.04 crore per annum and Rs 14,595.04 crore in financial year 2020-21 (for a period of 14 months from January 2020 to February 2021)," the statement said.
It will benefit about 48.34 lakh central government employees and 65.26 lakh pensioners.
"The increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission," it added.