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Union Cabinet led by PM Narendra Modi on Wednesday approved a 3 per cent increase in dearness allowance (DA) and dearness relief (DR) for Central government employees and pensioners.

The latest hike raises the DA or DR from 50 per cent to 53 per cent. The increase will come into effect from 1 July.

This decision is a major relief for Central government employees ahead of Diwali.

The biannual revision of DA and DR, which impacts approximately one crore Central government employees and pensioners, aims to mitigate the effects of inflation.

DA is given to the Central government employees which is calculated based on the average of the Consumer Price Index for Industrial Workers (CPI-IW), which is published monthly by the Labour Bureau, making it a crucial component in determining government salaries and pensions.

In March, the government raised the dearness allowance by 4 per cent, effective from January 2024, bringing the total dearness allowance to 50 per cent of basic pay from 46 per cent.

According to the Seventh Pay Commission report, a slew of allowances including house rent allowance is eligible for automatic revision once the DA reaches 50 per cent of the basic pay. These allowances, including HRA, were accordingly raised earlier this year, the Confederation of Central Government Employees confirmed.

However, the basic pay has not been raised as such a recommendation was not part of the final Seventh Pay Commission report.

Apart from this, Chhattisgarh Chief Minister Vishnu Dev Sai on Wednesday announced that DA for state government employees will be increased by 4 per cent ahead of Diwali. Due to hike, DA will become 50 per cent of the basic salary. This increase will be effective from October 1.