In what could bring cheers to 50 lakh central employees and 58 lakh pensioners ahead of Diwali, the Centre is all set to announce 2 per cent dearness allowance to be effective from July 1, 2016.
Dearness allowance and dearness relief is provided to employees and pensioners to neutralise the impact of price rise on their earnings.
"The proposal to provide 2 per cent dearness allowance and dearness relief to central government employees and pensioners respectively is listed on agenda of the Union Cabinet meeting," a source said.
Earlier this year the government hiked Dearness Allowance by 6 per cent to 125 per cent of the basic pay. The DA was later merged into the basic pay following implementation of 7th Pay Commission award.
The central government employee unions want that the DA should be increased by 3 per cent and not 2 per cent which is being considered by the centre.
As per the agreed formula, government increases DA on the basis of 12-month average of the retail inflation and does not consider the price rise rate beyond decimal point for deciding the rate of dearness allowance.