Over 10 million central government employees and pensioners will get five per cent additional Dearness Allowance with retrospective effect from July 1, this year.
The government employees union, however, described the decision as a "let down", saying the high inflation warranted a larger DA to match the benefits enjoyed by private sector employees.
The decision, which will cost the exchequer an additional Rs 1,858.15 crore during the current financial year, was taken at a meeting of the Cabinet chaired by Prime Minister Manmohan Singh.
"This will benefit the central government employees and pensioners to get higher amount of DA and dearness relief respectively", an official spokesperson said after the meeting.
The rate of DA and dearness relief from July 1, 2006 would now go up from 24 per cent to 29 per cent for all central government employees and pensioners besides family pensioners of central government, the spokesperson said.
Reacting to the announcement, Federation of Central Government Gazetted Officers Organisation Secretary General Rajesh Menon told PTI that the government should have revised the DA levels further upwards.
"The 5 per cent increase (in DA and DR) is welcome but there has been a spiralling inflation during the last few months. We feel let down by this and the only way to move on par with private sector employees is to quicken the pace of 6th pay commission", he said.