The cabinet Friday approved an eight percent increase in the dearness allowance of government employees and pensioners.

'The cabinet approved an eight percent increase in the dearness allowance of government employees and dearness relief of pensioners with effect from Jan 1, 2010,' Information and Broadcasting Minister Ambika Soni said.

'This is over and above the existing rate of 27 percent (of basic pay),' she said while briefing reporters after a cabinet meeting chaired by Prime Minister Manmohan Singh.

'The decision will cost the exchequer Rs.6,969.36 crore annually,' Ambika Soni said.