The union cabinet on Tuesday approved the release of 1% Dearness Allowance to Central Govt employees & Dearness Relief to pensioners w.e.f. 01.07.2017, reports ANI.
This decision was taken at the Union Cabinet meeting chaired by Prime Minister Narendra Modi.
"Release of additional installment of DA is an increase of 1 per cent over the existing rate of 4 per cent of the basic pay/pension, to compensate for price rise," according to an official statement.
The new rate will be applicable from July 1.
The combined impact on the exchequer on account of both DA and DR would be Rs 3,068.26 crore per annum and Rs 2,045.50 crore in the financial year 2017-18 (for a period of 8 months from July 2017 to February 2018).
This move will benefit about 49.26 lakh central government employees and 61.17 lakh pensioners, it said.
Dearness allowance and dearness relief are provided to employees and pensioners to neutralise the impact of inflation on their earnings.
The dearness allowance is paid as proportion of the basic pay of the central government employees.
Earlier last year, the government hiked DA by 6 per cent to 125 per cent of basic pay. The DA was later merged into the basic pay following the implementation of the 7th Pay Commission award.
At present the Central government employees and pensioners are entitled to 2 per cent dearness allowance, which was effected from July 1, 2016.