New Delhi : The Union Cabinet has approved a 2 percent dearness allowance in the salary of people working with the Central government. Ahead of Diwali, this move is likely to bring some cheers to around 50 lakh employees working with the central government as well as 58 lakh more pensioners. The provision of 2 percent dearness allowance was on the agenda of the Union Cabinet today on October 27, reports suggested earlier. Provision of dearness allowance and dearness relief is made to the employees and pensioners so as to neutralise the effect of price rise on their salary and saving. Earlier in 2016 itself, the government hiked dearness allowance by 6% to 125 % of the basic pay. However, after the implementation of 7th Pay Commission awards, the DA was merged into the basic pay of employees. The central government employee unions want that the DA should be increased by 3% and not 2% which is being considered by the Centre.

The president of Confederation of central government employees K K N Kutty told PTI, “The 12-month average of Consumer Price Index for Industrial Workers from 1 July 2015 to 30 June 2016, works out to be 2.92%. Therefore the unions had pressed for 3% DA. We are not satisfied with this.” As per the agreed formula, government increases DA on the basis of the 12-month average of the retail inflation and does not consider the price rise rate beyond the decimal point for deciding the rate of dearness allowance. The 7th Central Pay Commission, headed by Justice A K Mathur, submitted its report to Finance Minister Arun Jaitley in July. The 900-page report of the Pay panel with recommendations will be implemented from January 1, 2017. The recommendations that will benefit 47 lakh central government employees and 52 lakh pensioners, which will impact the Central Budget by Rs 73,650 crore and the Railway Budget by Rs 28,450 crore. The impact of recommendations would be an increase of 0.65 percentage of expenditure on salaries to GDP compared to 0.77 percent in 6th Pay Commission. The panel has suggested the abolition of the pay band and the grade pay, though it retained the annual increment of 3 per cent. It has also recommended a fitment factor of 2.57 which will be applied uniformly to all employees.