The decision benefiting 48 lakh government employees and 55 lakh pensioners would lead to an outgo of Rs 7,889.34 crore in the current fiscal.

The decision to hike the DA was taken at the meeting of the Union Cabinet headed by Prime Minister Narendra Modi, an official statement said.

"Central Government employees as well as pensioners are entitled for DA/Dearness Relief (DR) at the rate of 113 percent of the basic pay with effect from January 1, 2015," it added.

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The increase is in accordance with the accepted formula based on the recommendations of the 6th Central Pay Commission.

The release further said the combined impact on the exchequer on account of both DA and DR would be of the order of Rs 6,762.24 crore per annum, and Rs 7,889.34 crore in the 2015-16 (for a period of 14 months from January 2015 to February 2016).

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DA was last revise in September last year from 100 percent of basic pay to 107 percent. The increase was effective from July 1, 2014.

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