The government is likely to announce an increase in the dearness allowance (DA) paid to central government employees,taking it to 107 per cent of basic pay from the existing 100 per cent, benefiting around 3 million employees and 5 million pensioners and their dependants.
''The average rate of retail inflation for industrial workers from 1 July 2013 to 30 June 2014 works out to 7.25 per cent. Thus the central government will hike dearness allowance for it employees by 7 per cent,'' an official said.
The finance ministry will now put a cabinet proposal for approval of 7 per cent DA hike from 1 July this year on the basis of the revised consumer price index for industrial workers for June.
The DA hike will also benefit the pensioners as the benefit provided to them as dearness relief will also be hiked to 107 per cent.
The previous UPA government had, on February 28, increased DA to 100 per cent from 90 per cent with effect from 1 January 2014, on the basis of the agreed formula for revision of DA.
However, the government is yet to decide on the employees' union's long pending demand of merger of DA with basic pay.
"The erosion of value of wages is unbearable at 50 per cent dearness allowance. Now it will be 107 per cent. It is high time to merge DA with basic pay to provide relief to employees," PTI quoted Confederation of Central Government Employees' President K K N Kutty as saying.
According to the union, neither the 7th Pay Commission nor the UPA and the new NDA governments have paid any heed to its demand.
A merger of DA with basic pay will simultaneously increase other allowances paid in proportion of basic pay.
DA was to be merged with basic pay once it breached 50 per cent mark. But the 6th Pay Commission disallowed it.