The Union Cabinet approved hiking dearness allowance (DA) to 100 per cent from existing 90 per cent benefiting 50 lakh employees and 30 lakh pensioners in its meeting scheduled on Friday.
This increase in the dearness allowance by the UPA-2 government comes ahead of the imposition of the model code of conduct by the Election Commission.
The model code of conduct is likely to come into force with the announcement of the schedule for the forthcoming General Election in a week or so.
Also this is the second double digit DA hike in a row. The government had announced a hike of 10 per cent to 90 per cent in September last year, effective from July 1, 2013.
The hike in DA would be effective from the January 1 this year.
As per practice, the government uses Consumer Price Index- Industrial Workers data of the past 12 months to arrive at a quantum for the purpose of any DA hike. Thus, the retail inflation for industrial workers between January 1 to December 31, 2013 would be used to take a final call on the matter.
According to the provisional data released by government on January 31, the retail inflation for factory workers for the month of December stood at 9.13 per cent. The revised retail inflation data for January would be released on February 28.
An official said that the preliminary assessment suggests that DA hike will not be less than 10 per cent and would be effective from January 1 this year.