INDIA
In a populist move, the government has dug into its coffers to compensate about nine million government employees and pensioners by enhancing their dearness allowance (DA) by 10%.
In a populist move, the government has dug into its coffers to compensate about nine million government employees and pensioners by enhancing their dearness allowance (DA) by 10%.
This will entail a cost of Rs9,302.2 crore per year for the national exchequer.
The decision on raising DA for 50 lakh central government employees and 38 lakh pensioners, ahead of the festival season, would “compensate for price rise”, according to an official statement issued by the government on Thursday. The decision comes a day after the government raised the interest rate on the employees’ provident fund (EPF) by 1%.
DA will now be 45% of basic pay/pension, up from the current level of 35%. “The increase is in accordance with the accepted formula, based on the recommendations of the sixth pay commission,” a spokesperson said.
The cost for the government for the current financial year (2010-11) will be Rs6,202.1 crore, since the order is effective from July.
Once the DA component goes beyond 50% of the salary, all allowances should increase by up to 25%, according to the pay commission recommendations.
Double-digit food inflation, in the region of 15%, has been a significant concern for the UPA government for long. It had to battle the price rise issue in the recently concluded monsoon session in Parliament. With no signs of the prices of food items and other essential commodities decreasing, the government has been forced to hike salaries of government employees and pensioners, a section seen as a vote bank.
On Wednesday, the government hiked the interest rate on EPF to 9.5%. This would translate into higher returns on investments for 4.7 crore EPF subscribers.
As for food prices, pulses are likely to remain a problem area for two to three years due to a mismatch between supply and demand, cabinet secretary KM Chandrasekhar said recently.
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