In a union cabinet meeting chaired by Prime Minister Manmohan Singh, the decision was taken to hike the dearness allowance by 10% for central govt employees from July 2010.

On Thursday, 16th September, 2010 the central government of India has announced hike of 10% increase in Dearness Allowance for its central Govt. employees from July 2010 in the union cabinet meeting chaired by the Prime Minister, Manmohan Singh. More than 8 million central government and pensioners came in for a double. Previously the Dearness allowance was 35% of basic pay which has been increased to 45%.

Government has also increased the rate on the provident fund by 100 basis points. The Government said that the increase is in accordance with the accepted formula, based on the recommendations of the 6th Central Pay Commission.

The increase in DA from 35% to 45% of basic pay will cost an extra Rs.9, 303.2 crore per annum to the government. Price rises stood at 8.5% in August, with food price rises floating above 15%, as per the new wholesale price index, with the base year now shifted to 2004-05 from 1993-94 and as many as 241 new items added to the basket of supplies to asses the benchmark index. In the current financial year, the burden is estimated to be Rs 6,202.1 crore. In October and November, the increase in DA comes ahead of the Dussehra and Diwali festivals.

How to Calculate Dearness Allowance?

According to the price of commodities, every month government has announced All India Consumer Price Index. All India Consumer Price Index Number for Industrial Workers (CPI-IW) on base 2001=100 for the month of October, 2009 increased by 2 points and stood at 165 (one hundred and sixty five). With effect from 01.01.2006, Dearness allowance is granted to compensate the price increase above 536 points Base Year 1982=100, (115.763 points Base Year 2001=100).

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