Dearness Allowance linked to Consumer Price Index against inflation
General
Secretary of Confederation for Karnataka State Shri P.S.Prasad has
written an article on his blog about the Consumer Price Index for the
purpose of calculating Dearness allowance to Central Government
employees and Pensioners...
The detailed report of article has been reproduced and given below for your information...
DA & CPI UNDER ATTACK
The
Consumer Price Index is the main base for calculation of Dearness
Allowance for the Central Government and State Government Employees and
also the Industrial and Bank Employees.
The Consumer Price Index (CPI) is calculated using following steps:
a)
Market prices are collected for 252 items by the Officials of
Department of Statics and Department of Posts. These prices of that item
& place are sent to Central processing unit from 78 centres all
over India ( which are enclosed for your reference).
b)
The all India weights given the each category of items such as food
49.71%, housing 9.77 %, fuel 9.49% , footwear O.68%, transportation
7.5%, Medical 5.31%, Personnel care 2.92 % & Miscellaneous 26.31%
total 100% . CPI points are determined using this all India weights and
prices of the 252 items. (which are enclosed for your reference).
Now from the angle of Employees point of view following changes in all India weights should be brought.
a) Housing should be given as 15% instead of just 9.77 %.
b) Medical should be increased to 15% from 5.31 %.
c) The Miscellaneous items should be reduced to just 5% instead of 26.31 %
The
prices have risen by over 200% in last 61/2 years, whereas the CPI has
shown an increase from 115 points in Jan 2006 to 235 points in July 2013
that means an increase of 120 points and the actual DA is only 92%.
There is fault in the calculation of CPI itself apart from present DA
formula , as undue all India weights is given for some items such as
miscellaneous items such as 26% whatever increase in prices of the food,
fuel, transportation, housing are nullified by these 26% decrease in
prices or marginal increase in miscellaneous items.
The
Employees are not getting the right DA and thus they are not
compensated by the real increase in prices which are used for daily
needs.
A new series for the calculation of the
Consumer Price Index is under preparation by the Government of India.
For this purpose, Government has set up a Standing Tripartite Committee
(STC) to advise the Government on issues pertaining to the Consumer
Price Index for Industrial Workers (New Series).
There are two aspects in this move we should be doubly carefull.
1) There is vast difference between the real price increase and CPI thus an Employee is deprived of the real DA.
2)
The Government of India is thinking that the CPI is bloated or wrong
that has made burden on the financial burden on them hence it wants to
reduce its expenditure by modifying the CPI as a result of this what DA
we used to get 10% half yearly and this year by 20%, this can be avoided
by next year, hence it is seriously considering the aspect of revising
the All India weights of many items such as food which is at 59% to 30%.
By this the whole CPI increase will be limited to just 8 to 9 points in
a year rather than 25 points in a year by this we get only 3 to 4 % DA
every six months rather than 10% DA which we are used to get due to high
inflation and drastic rise in prices.
Now
the statements issued by Government of India officials ie Reserve Bank
Governor Shri D.Subbarao & Shri Kaushik Basu, Chief Economic
Advisor, Ministry of Finance, which is enclosed indicate this stand.
Instead of employees friendly CPI they want a Government of India
friendly CPI.
The wages of CG employees are
determined by principle of need based minimum wages as per table 2.21 of
6th CPC report where in only a few items are chosen rather than 252
items chosen by CPI.
I request one and all to
be serious about this issue otherwise the Employees will suffer in a
long run regarding wrong calculation of CPI and DA issue.
Please find enclosures ;
Ministry
of Labour and Employment, Government of India has decided to prepare a
new series of Consumer Price Index for Industrial Workers.
For
this purpose, Government has set up a Standing Tripartite Committee
(STC) to advise the Government on issues pertaining to the Consumer
Price Index for Industrial Workers (New Series).
The
STC will go into details of various parameters that are taken into
consideration for updation of the base year such as the weighting
diagram. consumption basket, selection of centres, sample size of
establishments for price collection etc.
Government
has no specific information about the skilled/semi-skilled worker
outsourced by the Central Government /State Governments through
contractors not being paid as per the CPI.
However, the Contract Labour Act, 1970 inter-alia, contains provisions for payment of wages to these category of workers.
The contract workers are also entitled to receive minimum wages as notified by the appropriate Governments from time to time.
This
information was given by Minister of State for Labour & Employment
Shri Kodikurinil Suresh in the Lok Sabha today in reply to a written
question.
MUMBAI: The new series of consumer
price index (CPI) is not enough for a robust statistical analysis of
prices, Reserve Bank Governor D Suhharao said on Friday.
He
also said the new CPI has an excess focus on food prices, which has a
50% weight. House rents, which account for 10%, are also a cause for
concern given doubts over the efficacy of the prices, he added.
“The
new CPI has only 19 data points which is not sufficient for a
statistically robust analysis,” Subbarao, who demits office on September
5, said while speaking at the Statistics Day conference at the RBI
headquarters here.
Dearness allowance link brings retail inflation figures under cloud
SMRITI SETH, ET Bureau Jul 19, 2011. 0347am 1ST.
http:/Iarticles.econom ictimes.indiatim es.com/20 11-07-1 9/news129790925_1 _cpi-iwretail-inflation-wpi-ancl-cpi
NEW
DELHI There could be a systemic over-estimation of the retail inflation
as measured by the consumer price index for industrial workers, or
CPI-1W, as it forms the basis for revision in the dearness allowance of
central government employees.
This retail
measure of inflation has generally shown a wide divergence with the
widely followed wholesale price index (WPI) inflation. “Since the people
who collect data for the CPI get their salaries indexed by the same
index it actually feeds into some tendency to bloat that,” said Kaushik
Basu, Chief Economic Advisor, Ministry of Finance. The CPI-IW is
compiled by the Labour Bureau and investigators are employed by state
governments - directorate of economics and statistics - to collect the
prices.
The index is used to decide the
dearness allowance of central government employees, which creates the
incentive for bloating up the index. ‘We have found a couple of items
that occur in both the WPI and CPI collected by different agencies. We
are now tracking these two to see it there is any bias in them. But
there are no results as yet,” Basu said. “A team at the ministry of
finance is looking at various aspects of inflation, this is one thing we
are indeed looking at,” he said. The labour bureau has strongly denied
any such possibility and insisted there was no form of manipulation
whatsoever.
“Our system is fool proof, there
are multiple levels of checks. There is no bias in the data collected,”
said an official at the Labour Bureau. Even experts are skeptical of the
possibility of such widespread coordination between all those involved
in the process. “It may be true and there is an incentive to do that
(unfairly bloat the CPI-IW), but one can’t say that without empirical
prool “. said Arup Mura, labour and employment professor, IEG.
This
needs a nexus, because unless all the officials coordinate it won’t be
possible,” added Mitra. The CPI-IW and WPI have shown vastly diverging
trends through the years. During 2009, when inflation rate as per the
CPI-IW was actually rising above 11%, the WPI inflation rate was falling
to negative rates.
Since January 1, 2008 the
rate of dearness allowance for central government employees has risen
from 12% to 51%, an increase of 39 percentage points. According to a
Patnaik, professor, NIPFP, the divergence can be explained by the
difference in baskets used for both the indices. She dismissed the
collectors’ bias theory, saying, “in a study, we found that the prices
for a particular commodity reported under CPI is in line with other
sources like the NCDEX, ministry of agriculture data. So evidence
doesn’t suggest a bias,” said Patnaik.
CPI—AII India weights -2011
See website: http://mospi.nic.in/Mospi_New/upload/brochure_n_cpi18_feb11.pdf
