Union Government has hiked dearness allowance for its about 50 lakh employees and 58 lakh pensioners by 2 percent on Wednesday.

Dearness allowance and dearness relief are provided to employees and pensioners to neutralise the impact of inflation on their earnings.

According to an Official Statement, it is said that "The Union Cabinet chaired by Prime Minister Narendra Modi has approved a release of an additional instalment of dearness allowance to central government employees and dearness relief to the pensioner with effect from January 1, 2017."

This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission.

As per the statement, The combined impact on the exchequer on account of both dearness allowance and dearness relief would be Rs 5,857.28 crore per annum and Rs 6,833.50 crore in the Financial Year 2017-18.

The union had also said that there was a lot of variation in the rates of price rise of commodities by Ministry of Agriculture and CPI-IW.

​Earlier last year, the government hiked dearness allowance by 6 per cent to 125 per cent of basic pay. The DA was later merged into the basic pay following the implementation of the 7th Pay Commission award.

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