The proposed hike is in accordance with the accepted formula based on the recommendations of the 6th Pay Commission
The Cabinet is likely to consider, on Wednesday, a proposal to increase dearness allowance to 119 per cent from 113 per cent, which if cleared will potentially benefit over one crore government employees and pensioners.
"The proposal to increase dearness allowance by six percentage points to 119 per cent is likely to be taken up by the Cabinet tomorrow," a source said.
Earlier in April, the government had hiked DA by 6 per cent to 113 per cent of their basic pay with effect from January. DA is paid as proportion of the basic pay.
The proposed DA hike will take effect from July 1. As per the agreed formula, the DA rate increase is an average of 12-month consumer price index-industrial workers from July 1, 2014 to June 30, 2015.
The proposed hike is in accordance with the accepted formula based on the recommendations of the 6th Pay Commission, which will benefit 48 lakh government employees and 55 lakh pensioners.
However, president of Confederation of Central Government Employees' and Workers K K N Kutty said: "The government should have given interim relief and merged DA with basic pay in view of the extension of term of the 7th Pay Commission by four months till December 31, 2015."
Elaborating, Kutty added: "The government assured employees that the 7th Pay Commission will submit its report in 18 months. It's delaying submission of the report by the commission because it doesn't want to increase its salaries bill this fiscal."
He further said that keeping in view the real rate of price rise, DA should have been 185 per cent of the basic pay.
Last month, the Cabinet had given approval for the extension of the term of the 7th Central Pay Commission by four months up to December 31.