The Union Cabinet on Friday raised dearness allowance to 100% from 90%, benefiting 50 lakh employees and 30 lakh pensioners.
The government has also cleared the way for merger of 50% DA with basic pay by approving it among the terms of reference of the 7th Pay Commission. An official said now the commission can suggest the merger in its interim report.
He added that 50% DA merger with basic pay will roughly increase the gross salaries of central government employees by around 30%.
The Cabinet approved the proposal to release an additional installment of DA and dearness relief (DR) to pensioners with effect from January 1, 2014, in cash, but not before the disbursement of the salary for the month of March 2014 at the rate of 10% increase over the existing rate of 90%, said an official statement.
Central government employees as well as pensioners are entitled for DA/DR at the rate of 100 per cent of the basic with effect from January 1, 2014, it said.
The government has estimated that the combined impact on exchequer on account of both DA and DR would be Rs 11,074.80 crore every year.