The Union Cabinet on Wednesday cleared 5 per cent hike in Dearness Allowance (DA) for Central Government employees and Dearness Relief (DR) to pensioners.

The Centre has increased the Dearness Allowance from 12 per cent to 17 per cent, Union minister Prakash Javadekar said after a Cabinet meeting on Wednesday.

Javadekar noted that previously DA had been raised by 2-3 per cent but this time it has been raised by 5 per cent in one go.

“This is a Diwali gift to government employees,” Javadekar said.

Around 50 lakh Central Government employees and over 62 lakh pensioners will benefit from the move.

The raise in DA would cost the government Rs 16,000 crore in its wage bill. The hiked rate will be applicable retrospectively from July this year.

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

The Dearness Allowance (DA) is a cost of living adjustment allowance paid to government employees, public sector employees (PSE) and pensioners. It is calculated as a percentage of an Indian citizen’s basic salary to mitigate the impact of inflation on people.

In another announcement, Javadekar said that government has decided to double the remuneration of Asha workers from Rs 1,000 t Rs 2,000.