New Delhi, March 7: The Union Cabinet on Wednesday hiked the dearness allowance of Central government employees to 7 per cent from the existing 5 per cent under 7th Pay Commission. This move will benefit around 48 lakh government employees and 52 lakh, pensioners. The implementation of the Dearness Allowance will be effective from January 1, 2018.Also Read - 7th Pay Commission News: LTC Rules Changed For Central Government Employees! Details Here

This is the first major development, this year for government employees who are eagerly waiting for good news. Also Read - DA Hike Likely Next Month; Check How Much Salary Will Rise For Central Govt Employees

“The Union Cabinet chaired by Prime Minister Narendra Modi has given its approval to release an additional instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners from January 1, 2018 representing an increase of 2 percent over the existing rate of 5 percent of the Basic Pay/Pension, to compensate for price rise,” an official statement said. Also Read - 7th Pay Commission: Uttarakhand Hikes Dearness Allowance of State Govt Employees to 31% From July 1

The combined impact on the exchequer on account of both Dearness Allowance and the Dearness relief would be Rs 6077.72 crore per annum and Rs 7090.68 crore in the next financial year (for a period of 14 months from January 2018 to February 2019).

According to experts, this increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Pay Commission.

In June 2016, the Union Cabinet approved the recommendations of the 7th Pay Commission on pay hike and allowances. The 7CPC had recommended a 14.27 per cent of basic pay hike – which is the lowest in 70 years.

The 7th Pay Commission had also raised the minimum pay from Rs 7,000 to Rs 18,000 per month while the maximum pay has been hiked from Rs 80,000 to Rs 2.25 lakh per month.

Last year in September, the government had given its approval for an increase of one per cent additional DA to central government employees and Dearness Relief (DR) to pensioners to compensate for price rise.