Ahead of festival season, Central Government will this month announce a hike in dearness allowance to 90 per cent from existing 80 per cent, benefiting about 50 lakh central employees and 30 lakh pensioners.
According to official source, dearness allowance hike will be 10 per cent and would be effective from July 1, this year.
The dearness allowance (DA) is a cost of living adjustment allowance paid to Government employees and pensioners in India.
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 prepare a proposal for the purpose for seeking Union Cabinet nod.
They further said the proposal will 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 to June 2013 will be used to take a final decision.