DA for government employees raised from 16 to 22 per cent

The cabinet committee on economic affairs has raised the cost of living allowance for government employees to 22 per cent of basic salary, from an earlier 16 per cent, home minister P Chidambaram said after a meeting of the CCEA.

The hike in dearness allowance comes close on the heels of a general hike in pay and perks of over 4 million government employees ahead of the general elections should act as another booster for consumption and demand and for the ranks of the ruling Congress party.

Central government employees and pensioners will get the additional DA from next month, with retrospective effect from 1 January 2009. The move is estimated to cost the exchequer around Rs3,514 crore, Chidambaram said.

The combined burden of the increased DA to employees and the retired will be Rs6,020 crore from January 2009 to February 2010, he said.

However, the exchequer will take a hit of Rs5,159 crore for the full year, Chidambaram said.

The decision to increase DA was taken because of the rise in the consumer price index for industrial workers.

While the inflation rate based on the wholesale price index has fallen over a period, high consumer prices of food articles has persisted for quite some time.

The consumer price index (CPI), in fact, tells a different and harsher story altogether about the rate for all commodities as well as for wheat and rice. The inflation rate for all commodities was over 10 per cent in December 2008 and January 2009 for the different groups covered at a time when the weekly WPI showed a much lower figure.

DA is revised twice a year, from 1t January and 1 July, payable in salaries of 1 March and 1 September, respectively.

The additional financial implication on account of the increase in DA to central government employees (excluding pensioners) would be Rs4,100 crore for 14 months from 1 January this year.

The rise in allowance, called dearness relief, to pensioners will cost the exchequer Rs1,920 crore during the period.

However, for a full year, the implication would be Rs3,514 crore because of revised DA for employees and Rs1,645 crore for pensioners.

Central government employees and pensioners got hike in salaries from September after the government approved the sixth pay commission's report with some modifications.