The United Progressive Alliance government on Thursday announced an average increase of 21 per cent in salaries of over 50 lakh government employees with effect from January 1, 2006, adopting the Sixth Pay Commission recommendations.

The wage hike would increase the financial implication for the Centre by Rs 17,798 crore (Rs 177.98 billion) annually and the arrears with effect from January 2006 would cost Rs 29,373 crore (Rs 293.73 billion), Information and Broadcasting Minister P R Dasmunsi told reporters after the Cabinet meeting.

The government increased the minimum entry level salary of a government employee to Rs 7,000 against Rs 6,660 recommended by the Commission headed by Justice B N Srikrishna who submitted the report in March this year.

Consequently, it would push up the total emoluments of an employee at the lowest level beyond Rs 10,000 per month including allowances.

It also increased the rate of annual increment from 2.5 per cent to 3 per cent.

In the defence sector, it approved at least three assured promotions for all defence forces personnel and civilian employees under the modified Assured Career Progression scheme.

While civilians would get this after 10, 20 and 30 years of service, defence forces jawans would be promoted under ACP after 8, 16 and 24 years.

The hiked salary would be given to the employees beginning September this year and the arrears from January 2006 would be given in cash in two installments -- 40 per cent this fiscal and 60 per cent in 2009-10.

The financial implication of Pay Commission on the General Budget would be Rs 15,717 crore (Rs 157.17 billion) and Rs 6414 crore (Rs 64.14 billion) on the Railway Budget in 2008-09.

The government's present salary bill is over Rs 70,000 crore (Rs 700 billion) and the pension bill is over Rs 30,000 crore (Rs 300 billion).

Finance Minister P Chidambaram said the Budget deficit target would be adhered to, despite the implementation of the Pay Commission recommendations.

The government for the first time approved Military Service Pay for armed forces personnel, under which officers would get Rs 6,000 over and above their pay per month.

The lowest limit of disability pension for defence personnel would be doubled to Rs 3100 a month.

• All about the 6th Pay Commission report