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In a bonanza for central government employees and pensioners, the Union Cabinet on Wednesday approved a 3 percentage point hike each in their Dearness Allowance (DA) and Dearness Relief (DR) to provide relief from rising prices.

With the hike, the DA of serving and retired central government employees will increase to 34% of basic pay from the current 31%. The new rates will be effective 1 January, 2022. The combined impact on the exchequer is expected to be 9,544.50 crore a year. While DA is a component of the monthly salary paid to employees to compensate for increased cost of living due to inflation, DR is the amount provided to pensioners. 

A statement from the finance ministry said the move will benefit about 4.76 million central government employees and 6.86 million pensioners. It said the increase is in accordance with the accepted formula, based on the recommendations of the 7th Central Pay Commission. 

The development comes at a time when the country is witnessing high inflation and concerns loom of a further surge in prices due to the Russia-Ukraine crisis. 

The increased DA is expected to help employees to cover a portion of the erosion in their purchasing power. The retail or the consumer price inflation (CPI) has remained above the upper end of the RBI’s target range of 2-6% for two months this year while fuel prices are on the boil due to the Ukraine-Russia conflict. DA was hiked by 3 percentage points to 31% in October last year, which was effective from 1 July, 2021. Three months before that, DA was increased from 17% to 28%.

In another major decision, the cabinet on Wednesday approved an $808-million programme for “raising and accelerating MSME performance" (RAMP). The scheme will come into effect from the next financial year.

The total outlay for the scheme is 6,062.45 crore or $808 million, out of which 3,750 crore or $500 million comes from a loan from the World Bank and the remaining 2,312.45 crore or $308 million would be given by the union government.

The scheme--RAMP -- is aimed at supporting various schemes of the Ministry of Micro, Small and Medium Enterprises for supporting the MSMEs amid the pandemic. 

It is expected to improve access to market and credit, strengthening institutions and governance at the centre and states, improving Centre-State linkages and partnerships, addressing issues of delayed payments and greening of MSMEs.

In a major decision for the power sector, the Cabinet Committee on Economic Affairs (CCEA) approved the extension of time period for 10 identified provisional mega certified projects by 36 months for furnishing the final mega certificates to the tax authorities.

According to the government, extension of time period for furnishing the measure will enable developers to competitively bid for future power purchase agreements (PPA) and get tax exemptions as per policy terms. Increased liquidity will boost economic growth and also ensure the revival of various stressed power assets, according to a statement from the government.

It noted that the time period for the 10 provisional mega projects which are commissioned or partly commissioned for furnishing the final mega certificates to the tax authorities has been extended to 156 months instead of 120 months from the date of import. 

During this extended period, bids for sourcing electricity will be invited in co-ordination with Ministry of New & Renewable Energy and Solar Energy Corporation of India Limited and these mega projects are expected to participate in such bids to secure the PPAs.

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