With the festival season round the corner, the government is considering announcing a 10 per cent hike in dearness allowance (DA) to make it 90 per cent from existing 80 per cent, benefiting about 50 lakh central employees and 30 lakh pensioners.
Informing this, sources in the government said the finance ministry is working out a Cabinet note to give 10 per cent DA hike to employees and pensioners, which would be effective from July 1 this year.
The sources further said the exact amount of dearness allowance, as a proportion of basic pay, works out to over 90 per cent after factoring in the revised all India Consumer Price Index for Industrial Workers (CPI-IW) for June.
According to revised data released on August 30, retail inflation for factory workers for June stood at 11.63 per cent, higher than provisional estimate of 11.06 per cent for the month released on July 31.
Sources said that since the revised estimate for the month of June is available, the finance ministry would soon take the proposal to Union Cabinet for its nod. They further said the proposal would be moved this month.
There would be a double-digit hike in DA after about three years. It was last in September 2010 that the government had announced a hike of 10 per cent to be given with effect from July 1, 2010.
DA was hiked to 80 per cent from 72 per cent in April 2013, effective from January 1, this year.
As per the practice, the government uses CPI-IW data for past 12 month or a year to arrive at a number for the purpose of any DA hike. Thus, the retail inflation for industrial workers between July 2012 and June 2013 will be used to take a final decision.