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Fitment doesn’t reflect reality
The Government of Telangana has agreed for sanction of 43% fitment to the State government employees through 10th Pay Revision Commission (PRC). Revision of pay for employees is done to compensate inflation or hike in prices during the reference period.
Expenditure on education, medical, rents, household accessories, communication tools like cell phones etc., is not reflected in the Index as these items were not reflected in family living survey conducted in 1999-2000, on which total index is based. Hence, the DA based on the Index does not compensate for the rise in inflation
The Government of Telangana has agreed for sanction of 43% fitment to the State government employees through 10th Pay Revision Commission (PRC). Revision of pay for employees is done to compensate inflation or hike in prices during the reference period.
The fitment is the quantum of amount which is sanctioned to the employees while undertaking revision of pay and the exercise would always lead to add an additional percentage in the Dearness Allowance (DA) already sanctioned in the tenure of 5 years.
Now the question is whether the DA is offsetting the inflation, if not why?
The compensating argument is as follows: The DA which is announced by the State and Central governments is a moving average of 12 months Index of Industrial Workers whereas for companies, the DA. is a Variable DA based on monthly Index of Industrial Workers. The Index calculation is based on Family Living Survey conducted in the year 1999-2000.
The Base adopted for calculation of Index in the recent series is 2001=100. There are 78 Centres in all over India from which prices are collected on which the Index of Industrial Workers is based. In this family living survey, approximately 160 items of food and non-food items are covered.
As per the International Labour Organisation (ILO), the norms for changing the base year for calculation of Index is 5 years. After 1982, the Base Year was again changed in the year 2001, after a gap of almost 20 years which is against the norms of ILO.
The current base year 2001=100 was effectively adopted in the year 2006. Now even adopting the base year 2001, for the current series, it is a gap of 12 years. The purpose of adopting or changing the base year is to capture the recent consumption behavior of the industrial workers.
During this gap of 12 years, without changing the base year, a phenomenal change in the consumption behavior has been observed, wherein the expenditure on food item has gone down and the expenditure on non-food items has gone up, which is not reflected in the present series.
In the recent years, the expenditure on education, medical, rents, household accessories, accessories on communication like cell phones etc., is not reflected in the Index as these items were not reflected in family living survey conducted in 1999-2000, on which total index is based.
This clearly indicates that index is not properly reflecting the actual need position of the individual and hence the allotted DA has not compensated the inflation totally. Thus, it is a confirmed fact that the Dearness Allowance is not compensating the inflation.
The DA which is calculated, based on the Consumer Price Index of Industrial Workers, is being sanctioned to the State and the Central government employees. The consumption pattern of industrial workers and State/Central government employees is totally different. The food expenditure of industrial workers is apparently more than that of non-food expenditure, but it is reverse in the case of household expenditure of State/Central government employees.
Hence, it is not appropriate to adopt the Price Index of Industrial Workers for sanction of DA to employees. The 4th, the 5th and the 6th Central Pay Revision Commissions submitted their recommendations to the Government of India to conduct the Family Living Survey for exclusively employees category, so that actual consumption pattern of employees can be identified and based on that, if the Index is calculated, it may nullify the adverse effects of inflation. In fact, at present the DA is not compensating the Inflation.
During the period from 1-7-2008 to 31-7-2013, the accumulated inflation has reached more than 106%. Hence, the government after an exhaustive exercise agreed to sanction 43% fitment. This 43% fitment, when accumulated with 63.344% DA announced as on 1-7-2013 compensates the inflation.
By:Syed Saleemuddin
