New Delhi: In a big cheer for the government employees, the Union Cabinet on Tuesday increased the dearness allowance (DA) from 9 per cent to 12 per cent. The increase in dearness allowance to government employees and pensioners has been made effective from January 1, 2019. Reportedly, the move will benefit around 1 crore government employees and pensioners across the country. The decision will cost the government a total amount of Rs 9,200 crore per year. However, employees of private companies will not get this benefit.

The decision in this regard was taken at the Union Cabinet meeting chaired by Prime Minister Narendra Modi. The Union Cabinet has approved additional DA of 3 per cent over the existing rate of 9 per cent to government employees and dearness relief to pensioners from January 1, 2019, Finance Minister Arun Jaitley told reporters after the Cabinet meeting.

The hike will benefit about 48.41 lakh central government employees and 62.03 lakh pensioners. This increase is in accordance with the accepted formula, which is based on the recommendations of the Seventh Central Pay Commission.

The Dearness Allowance or DA is paid by the Union government to its employees and pensioners in order to avoid the impact of inflation. This amount is calculated on the basis of the location of the individual, and thus, varies from person to person. DA can be basically understood as a component of salary which is some fixed percentage of the basic salary.