The Union Cabinet on Thursday approved the release of an additional instalment of dearness allowance to Central Government employees and dearness relief (DR) to pensioners with effect from July 1 this year, representing an increase of 3 per cent over the existing rate of 28 per cent of the basic pay/pension to compensate for price rise.

This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission. The combined impact on the exchequer on account of both dearness allowance and dearness relief would be ₹9,488.7 crore per annum, an official release said.

This will benefit about 47.14 lakh Central Government employees and 68.62 lakh pensioners, the release added.

It may be recalled that the government in July 2021 had approved pending DA and DR hikes for central government employees and pensioners after almost a year.

Cost to exchequer

The government had then indicated that restoring the DA and DR hikes would cost ₹34,400 crore to the exchequer.

The government had in 2020 temporarily halted DA and DR benefits for central government employees and pensioners due to a shortfall in revenue collection post the Covid pandemic devastating the economy.