The union cabinet today hiked dearness allowance by 7 per cent to all central government employees

The union cabinet on Monday hiked dearness allowance by 7 per cent to 72 per cent of the basic pay for all central government employees.

The move will benefit about 50 lakh serving employees and 30 lakh pensioners. It will also mean an additional burden of about Rs. 7,400 crore a year on the exchequer, Rs. 5000 crore for the effective eight-month period in this financial year.

The new DA was cleared at a meeting of the Cabinet Committee on Economic Affairs (CCEA) this evening.

The hike will be effective from July 1, 2012, and employees will get arrears from that date. The dearness allowance was last hiked from 58 per cent to 65 per cent of the basic pay March this year.

The government periodically hikes the DA, which is linked to the consumer price index for industrial workers. The consumer price index, or CPI, which is based on movement in retail prices, soared to 10.03 per cent in August, from 9.86 per cent in July.