The cabinet is, at its next meeting, expected to give its approval to the additional Dearness Allowance of two percent to Central Government employees and pensioners, to come into effect from January 1, 2017 onwards.
The 2% Additional Dearness Allowance hike will be calculated on the basis of the basic pay as recommended by the Seventh Pay Commission, and will be given to more than 47 lakh Central Government employees and 53 lakh pensioners, of which 14 lakh employees and 18 lakh pensioners are from the defence forces.
The Centre today increased dearness allowance and dearness relief to 4 per cent from existing 2 per cent from January 1, 2017.
This hike in DA/DR will benefit 48.85 lakh central government employees and 55.51 lakh pensioners, it said.
The DA/DR has been increased by 2 per cent over the existing rate of 2 per cent of the basic pay/pension to compensate for price rise and it is in accordance with the accepted formula based on the recommendation of 7th pay commission, the statement said.
The statement said that the combined impact on the exchequer on account of both dearness allowance and dearness relief would be Rs 5,857.28 crore per annum and Rs 6,833.50 crore in the Financial Year 2017-18 (for a period of 14 months from January, 2017 to February, 2018).
The Dearness Allowance, issued once every six months, is given to Central Government employees and pensioners to help them manage the increase in prices of essential commodities. The Dearness Allowance is calculated on the basis of the Consumer Price Index Numbers for Industrial Workers on Base Year 2001=100.
The percentage for January 2017 was arrived at by recording the prices of essential commodities at 78 towns and cities across the country, for the months of July 2016 till December 2016. Based on the data and calculation, the percentage may be fixed at 4.95 percent.
But, according to the method prescribed by the Pay Commission, the decimal numbers are ignored. Hence, a Dearness Allowance of four percent will be issued with effect from January 1, 2017 onwards.