The Union cabinet on Tuesday approved an additional dearness allowance (DA) of 3 per cent over the existing rate of 9 per cent for government employees and pensioners which will be effective from January 1, 2019. Last August, the Narendra Modi government had approved an increase of 2 per cent in the DA for the central government employees, effective from July 1, 2018, over the existing rate of 7 per cent of the basic pay or pension in order to "compensate for price rise". Previously, in March 2018, the Cabinet had increased DA from 5 per cent to 7 per cent in accordance with the recommendations of the 7th Central Pay Commission, a move that benefited about 48.41 lakh central government employees and 61.17 lakh pensioners.
The decision will cost the exchequer over Rs. 9,000 crore.
This increase is in accordance with the accepted formula, which is based on the recommendations of the Seventh Central Pay Commission.