By SUNIL Sonkar

New Delhi, March 19 — The cabinet on Friday increased the dearness allowance to 8 percent for central government employees and pensioners to compensate for price rise.

The increase in the dearness allowance is in accordance with the accepted formula that is based on Sixth Central Pay commission’s recommendations.

Union Information and Broadcasting Minister Ambika Soni said, ‘The Cabinet approved an eight per cent increase in the dearness allowance of government employees and dearness relief of pensioners with effect from Jan 1, 2010.’

According to todays announcement, the increase would be 8% over the existing rate of 27% of basic pay or the pension. It would be released with effect from January 2010.

Ambika Soni also added, ‘The decision will cost the exchequer Rs.6,969.36 crore annually.’

This hike in dearness allowance will be costing the government additional Rs 69.7 billion ($1.5 billion) each year.

The dearness allowance is revised twice a year and it is linked to the percentage rise in the 12-month average of consumer price index.