Dearness allowance for central government employees has been hiked to 125 per cent of basic pay, up by 6 percentage points, with effect from January 1, 2016, the Finance Ministry said today. ".Dearness Allowance payable to central government employees shall be enhanced from existing rate of 119 per cent to 125 per cent from January 1,2016," according to a Finance Ministry office memorandum bringing into effect the DA hike announced last month. The decision to release an additional instalment of DA to central government employees and Dearness Relief (DR) to Pensioners from January 1, 2016, was taken by Union Cabinet on March 23. The combined impact on the exchequer on account of both DA and Dearness Relief would be of Rs 6,796.50 crore per annum and Rs 7,929.24 crore respectively, in 2016-17 (for a period of 14 months from January, 2016 to February, 2017). The DA will benefit 50 lakh central government employees and 58 lakh pensioners. Dearness Allowance is paid as a portion of basic pay of employees to neutralise the impact of inflation. Pensioners get Dearness Relief. The Centre revises DA twice a year on the basis of one year average of retail inflation for industrial workers as per a pre-determined formula. In September last year, DA was increased to 119 per cent from 113 per cent with effect from July 1, 2015. In April last year, the government had hiked DA by 6 percentage points to 113 per cent of the basic pay with effect from January 1, 2015.