The Union Cabinet on Wednesday approved a 4 per cent dearness allowance (DA) hike for central government employees. The 4 per cent hike translates into 46 per cent DA, which currently stands at 42 per cent. The hike would be effective from July 1, 2023.

This is the second hike this year as the Union Cabinet had increased the DA and dearness relief by 4 per cent to 42 per cent in March. According to I&B Minister Anurag Thakur, the combined impact on the exchequer is Rs 12,815.60 crore per annum. The hike was effective from January 1, 2023. The Cabinet had also raised additional DA by 4 per cent in September last year, weeks before Diwali.

Dearness Allowance (DA) refers to a cost-of-living adjustment allowance allotted to public sector employees by the government. It is assessed on the basis of the latest Consumer Price Index for Industrial Workers (CPI-IW).

Government uses a fixed formula for calculating dearness allowance of central government employees and pensioners.

For Central Government Employees

DA% = [(Average of AICPI (Base Year 2001 = 100) for the last 12 months – 115.76)/115.76] x 100

For Public Sector Employees

DA% = [(Average of AICPI (Base Year 2001 = 100) for the last 3 months – 126.33)/126.33] x 100

The decision will benefit 47 lakh employees and 68 lakh pensioners. The Cabinet has also approved bonuses for central government railway employees.