The Centre announced on Wednesday an additional hike of 5 percentage points in the dearness allowance that would be given to 50 lakh employees and another 65 lakh pensioners from July onwards.

“This is a Diwali gift from the Centre to the employees,” said Information and Broadcasting Minister Prakash Javadekar at a press conference in Delhi.

The Centre would now release an additional installment of dearness allowance (DA) to employees and dearness relief to pensioners from July 2019 representing an increase of 5 percentage points over the existing rate of 12% of the basic pay or pension, to compensate for price rise.

This will benefit about 49.93 lakh central government employees and 65.26 lakh pensioners, Javadekar said.The combined impact on the exchequer on account of both DA and dearness relief would be Rs 15909.35 crore per annum and Rs 10606.20 crore in the financial year 2019-20 (for a period of 08 months from July, 2019 to February, 2020), an official statement said.

This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission.

The additional financial implication on account of this increase in DA is estimated at Rs 8590.20 crore per year; and Rs 5726.80 crore in the current financial year of 2019-20 (for 8 months from July 2019 to February 2020). The additional financial implication on account of the dearness relief to pensioners is estimated to be Rs 7319.15 Crore per annum and Rs 4870 crore in the current financial year, the statement said.

DA is paid to central government employees to adjust the cost of living and to protect their basic pay from erosion in the real value. DA is revised twice a year from January 1 and July 1.
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