Memorandum to VII CPC on merger of DA with Pay and Interim Relief
National Council (Staff Side)
Joint Consultative Machinery
for Central Government Employees
13-C, Ferozshah Road, New Delhi – 110001
Shiva Gopal Mishra
General Secretary
No.NC4JCM/2O14/VII CPC
Dated: June 3, 2014
Justice Shri Ashok Kumar Mathur,
Chairman,
Seventh Central Pay Commission,
New Delhi
Dear Sir
Sub:
Memorandum to VII CPC on merger of DA with Pay and Interim Relief
As was decided in the Preliminary Discussion Meeting, held on 28”‘
May, 2014, with the VII CPC, we submit herewith Memorandum on Merger of
Dearness Allowance with Pay and Interim Relief, on behalf of Staff Side,
National Council(JCM).
Yours faithfully,
sd/-
(Shiva Gopal Mishra)
Copy to: Ms Meena Agarwal, Secretary, Seventh Central Pay Commission
(Government of India), New Delhi, along with a copy of above cited
memorandum.
Encl: As above
Copy to: All Constituent Organizations of the NC/JCM(Staff Side), along with a copy of above cited memorandum.
Encl: As above
MEMORANDUM ON MERGER OF DA WITH PAY AND INTERIM RELIEF.
We solicit the kind reference of the 7th
Central Pay Commission to the discussion during the informal
interaction the staff side of the National Council had with the
Commission on 28.5.2014, when we inter alia raised the issue of merger
of Dearness allowance and Interim Relief.
2. Before we dwell upon the issues, it
may not be out of place to refer to the evolution of the JCM which later
became the negotiating platform for the entirety of Central Government
employees and workers It was conceived to bring about a conflict free
industrial climate in Civil Service in the wake of the tumultuous
experience of an industrial strike action in 1960. The National Council,
the apex forum under the three tier system headed by the Cabinet
Secretary was empowered to deliberate upon the common issues of the
Central Government employees. The Staff Side, National Council, thus
became the united voice of the entirety of the Central Government
employees on fundamental issues like Wages, Pay Scales, Rate of
increment, Dearness compensation and other general allowances.
3. However, over the years, JCM became
an ineffective instrument to address the basic issues and demands of the
employees. We shall detail the requirements to empower and streamline
the functioning of the JCM as a negotiating forum in our Main Memorandum
to the Commission.
4. The twin issues viz. Merger of DA and
Interim relief had been the subject matter of discussion with the
Government when the Staff side was called upon to present their views in
the matter of finalization of the terms of reference for the 7th CPC by
the Secretary, Personnel, (Department of Personnel and Training) in his
capacity as Chairman, Standing Committee, National Council JCM. Though
we pleaded for the specific reference of the above two issues, to the
7th CPC, the final 1 version of the terms of reference approved by the
Government did not find a place for our views. We have, therefore, been
constrained to take recourse to clause 5 in the terms of reference,
which enables the Commission to send interim report to the Government.
MERGER OF DA WITH PAY:
5. Dearness allowance is considered as a
device to protect, to a greater or lesser extent, the real income of
wage earners and salaried employees from the effects of rise in prices.
As per the vagaries of price fluctuation in the market, the allowances
are bound to go up and down. Constant rise in the price level, might
bring about a situation whereby the quantum of allowance shall go up.
Such a phenomenon of constant increase of prices of commodities gave
rise to the demand for merger of Dearness allowances with pay so as to
make it pay, rather than an allowance, with all concomitant benefits. A
committee to advice the Govt. on the portion of such DA to be treated as
pay was appointed on 15th July, 1952 (Resolution No. F6(6)E-II/52). The
terms of reference of the Committee was :
“Taking in to
consideration the rates of dearness allowance that have been sanctioned
to date for Central Govt. servents, and the level at which cost of
living index are likely to stabilize in the foreseable future, to
recommend the percentage of dearness allowance now given to the Central
Govt. servents which should be allowed to be treated as pay for all
purposes in future, provided that by doing so the present total pay and
dearness allowance is not enhanced:”
6. The said committee was headed by Shri N.V. Gadgil, Member of Parliament. The Committee in its report concluded that
“We have recorded
the various reasons which we have taken into account in arriving at the
conclusion that the appropriate level below which the All India cost of
living index is not likely to fall, should be taken as 265-284. We find
that for the index figure of 265, the Central Pay Commission formula
allows Govt. Employees in the lowest pay group a dearness allowance of
Rs.20/- and this amount remain unchanged until the cost of living index
go above the index of the next level i.e. 285. We, therefore, consider
that the employees in this pay group, a sum of Rs. 20/- which represents
50% of the present dearness allowance of Rs. 40 per month should be
treated as pay (page 22 chapter V Report of the Dearness allowance
Committee).”
7. The Committee also enumerated in their report the purposes for which the DA shall be treated as pay as under:-
Retirement Benefits
Travelling allowance
Compensatory allowance
House rent allowance
Compensation of Leave Salary etc.
8. The 3rd CPC, whose recommendations
were implemented with effect from 1.1.1973 had no reference from the
Govt. on the question of merger of DA. Still while dealing with the
issue of Dearness allowance (vol.IV – Page 1 Ch.55) the Commission noted
that “no other country in the world (except Ceylon and Pakistan) seems
to be following the practice of paying dearness allowance or cost of
living allowance as a separate element of wage. In most of the countries
compensation to Govt. employees for the increase in the price level is
given by way of periodical salary revisions Prior to the setting up of
the 3rd CPC, pursuant to the discussion in the National Council, JCM,
the entire dearness allowance as on 1.8.1966 was treated as Dearness pay
and the consequent increase in allowance was granted by the Government
with effect from 1.12.1968. In para 16, the Commission recommended that
should the price level rise above twelve monthly index of 272 (
1960=100) the Government should review the position and decide whether
the Dearness allowance Scheme should be extended further or the pay
scale themselves should be revised. ( Page 4 Chapter 55. Vol. 4 3 rd CPC
report). On crossing the index point of 272, the Government conceded
the demand for merger of 36% of DA with pay. Later, based on an
agreement reached at the National Council JCM the DA granted upto the
index level of 320 points i.e. 60% of the Basic Pay was merged through
executive instructions for purpose of allowances and pension. Before the
4th CPC was set up in 1983, the issue of further merger of DA with Pay
was raised by the employees. Conceding the demand the Government decided
that DA entitled to be drawn upto the index average of 568 points be
treated as pay for all purposes.
9. Since the Pay Scales were to be
constructed with reference to the consumer price index as on the date of
revision, every Commission had to perforce merge the entire DA when the
actual revision was made. The DA on such revised pay is to be computed
on the basis of annual average rise of index after every six months
interval. Therefore, the question of merger of DA again rose at the time
of negotiation with the Government for setting up the 5th CPC. An
agreement was reached on merger of certain percentage of DA and interim
relief. (Rs. 100/-) in September, 1993. In April, 1994, the Government
issued notification setting up the 5 th CPC (resolution No.
5(12)E-III/93 dated 9.4.1994).
10. The Staff Side placed before the 5th
CPC the necessity to merge DA with Pay at an index level below which
prices were not likely to move downwards. Pointing out that in the last
two decades i.e. 1980s and 1990s there had been not a single occasion
when the annual average index had fallen consequent upon which the DA
rates were to be reduced, they requested the Commission to merge the
entire DA which had been at 97% of the Basic pay as on 1.7. 1993. (The
AICPI index being 1201.66). The Commission after deliberations on the
memorandum and discussion with the staff Side, recommended that 97% of
Basic Pay as DA admissible from. 1.7. 1993 be treated as Pay for all
purposes. However, they suggested that the said merger might be given
effect only from 1.4. 1995.
11.The 5th CPC submitted its final
report to the Government on 19th January, 1997. Before the Commission,
the Staff side had demanded that as and when the consumer price index
exceeds 25% of the base index at which the pay is fixed that proportion
of Dearness allowance should be treated as Pay for all purposes and the
decision on this must not be left at the discretion of the Government.
The Commission considering this demand observed that:
“From the past trend
of CPI given in annexure 11’8.1 it is observed that 50% increase in
prices generally takes around five years to materialise. A mid-term
quinquennial revision of salaries of the Government employees is not
something the Government should grudge. In view of the above, we
recommend that DA should be converted into Dearness Pay each time the
CPI increases by 50% over the base index used by the last Pay
Commission. Such DA should be termed as Dearness Pay and be counted for
all purposes including retirement benefits. (Chapter 105 page 157)”. The
5th CPC thus regularised the periodical merger of DA into a well
thought 11. out scheme. They also established that wage revision is
needed either when the DA exceeds 50% over the base index or after five
years .
12. The Government, however, did not act
upon this recommendation, when the percentage of DA exceeded 50( 52%)
as on 1.7.2002, though it had accepted the recommendation in 1997. With
the persistent persuasion, ultimately, the Government issued orders
treating 50% DA as Dearness Pay for all purposes with effect
from.1.4.2004.
13. Even though the 5th CPC had brought
about a finality on the approach to the question of merger of DA with
pay, the 6th CPC reopened the issue afresh. The Commission made the
following observation-
“This conversion
(merger of DA with Pay) is however not necessary in the revised
structure being recommended where increments are payable as a percentage
of Pay in the Pay Band and Grade Pay thereon and provision has been
made for all allowances/benefits to be revised periodically, linked to
the increase in the price index. The Commission is, therefore, not
recommending merger of DA with Basic pay at any stage.”
14. The 3rd, 4th and 5th Central Pay
Commissions had approvingly endorsed the recommendations made by Gadgil
Committee in 1952. The practice of periodical merger had been followed
as a device to protect the erosion in the real value of wages (including
allowances) especially at the lowest level of employees. This erosion
becomes unbearable when DA crosses over 50%. To say that the increment
rate which is presently 3% of pay would take care of the erosion is to
say the least, atrocious. Increment is granted as a legitimate reward
for the service rendered by an employee for a year. It has nothing to do
with the erosion in the real value of wages. No doubt, the 6th CPC has
recommended that a few allowances should be revised by 25% as and when
the DA crosses over the stipulated 50%. Such allowances are very in
number. Moreover, 25% rise as a compensation when the DA itself rises to
50% is arbitrary and conceived to compensate the worker with lesser
amount than what he is entitled to.
15. We, therefore, strongly plead before
the Commission, for the reasons enumerated in the foregoing paras, that
the Dearness allowance as on 1.1.2014 which stood at 100% may be
recommended to be merged and treated as Dearness Pay for grant of all
benefits, allowances, pension and other retirement entitlements.
16. We further submit that Merger of
D.A. as on 1.1.2014 may also be recommended in respect of pensioners and
Gramin Dak Sewaks of Postal Departments.
INTERIM RELIEF.
Barring the 6th Central Pay Commission,
all other Commissions had recommended grant of Interim Relief to the
Central Government Employees. As per the 5thCPC, Interim relief
represented a provisional arrangement during the period between setting
up of a Pay Commission and submission of a report by the Commission and
its acceptance by the Government. Most of the earlier Commissions with
the exception of Ist and 6th Central Pay Commission had taken 2-3 years
and sometimes more to finalise their recommendations. Despite the
specific reference made to the 6th CPC, by the Government to consider
grant of Interim Relief the Commission took the position that having
decided to submit its recommendation within the stipulated period of
eighteen months and having arrived at a view that its recommendations
must be effective from 1.1.2006, it shall not waste time on the question
of interim relief. What the 6th CPC failed to appreciate was the
erosion in the real value of wages that had taken place over the years
due to inflation and rise in prices of essential commodities and the
inability especially of the employees at the lower level to make the
both ends meet with the available wages. No doubt, the employees had
been to some extent benefitted by the decision of the Government to
merge 50% Dearness allowance and treat it as pay for all purposes
including DA thereon.
2. Every Pay Commission which had
recommended Interim Relief had made it amply clear that it was intended
to provide some relief to the employees pending a comprehensive
determination of their salary structure and other benefits. The relief
granted was treated as sui generis (one of its own kind, unique) and it
was not taken into account for determining any allowance or benefit.
3. We give below briefly the course of
negotiation and approach of various earlier Pay Commissions on the
question of grant of interim relief.
4. The Second Pay Commission gave a
report within a month’s time and recommended an Interim Relief of Rs.
5/-. The third pay Commission gave three instalments of Interim Relief
on varying rates. After appoint of the 4th CPC in July, 1983, Government
sanctioned (Vide Department of Expenditure O.M.No. 7(39)-E III/83 dated
2nd August, 1983) on their own initiative Interim Relief at varying
rates of Rs. 50 and Rs. 100 per month. In March, 1985, 4th CPC submitted
a report and granted a further interim relief at 10% of Basic pay
subject to a minimum of Rs. 50 per month. Again before the setting up of
the 5th CPC, the Government sanctioned Rs. 100 as interim Relief. As it
was not considered adequate, the staff side of the National Council,
JCM submitted a memorandum to the 5th CPC demanding additional interim
relief. The Govt. vide their Department of Expenditure, Resolution No.
5(12)EIII/93 dated 12.01.1995 amended the terms of reference to enable
the Commission to decide upon the additional interim relief. The 5th
Central Pay Commission in their interim report submitted on 2 nd May,
1995, recommended Interim Relief equal to 10% of Basic Pay subject to a
minimum of Rs. 100/-. The terms of reference of 6th CPC on the issue of
Interim Relief was as under:-
“2.g. To examine
desirability and need to sanction any interim relief till the time the
recommendations of the Commission are made and accepted by the
Government”
5. It has to be recalled that the
Government did not initially refer the question of Interim Relief to the
5th CPC but when the Staff Side submitted their memorandum to the
Commission on I.R., the Government had to amend the terms of reference
and refer the issue to the Commission for their decision.
6. These go to establish the need for a
relief in view of the erosion in the real value of wages, the need to
fill the widening gap in wages when compared to outside rates and the
fact that final recommendations of the 7 th Pay Commission are bound to
revise the wage structure and above all the need to provide some relief
to the employees who would retire before the Commission’s
recommendations are finally submitted to the Government and accepted by
them.
7. We give hereunder a table indicating
the retail prices of the commodities which goes into the computation of
minimum wage as per Dr.Ackroyd formula as on 1.1.2006 (quoted by the 6th
CPC in their report. Page 53. Table 2.1`.1 Chapter 2.2.) and the actual
retail price of those very commodities as on 1.1.2011. The percentage
increase in the prices of each commodity is also given in the table. The
average rise in prices was of the order of 174%, whehreas the Dearness
allowance entitlement was only 51%.. The table clearly indicate the
erosion in the real value of the wages.
| Sl.No |
Name of articles |
Price as on 1.1.2006 |
As on date |
%increase |
| 1 |
Rice |
18 |
38 |
120 |
| 2 |
Dhall 4 varieties average |
40 |
87 |
120 |
| 3 |
Raw vegetables |
10 |
40 |
400 |
| 4 |
Green veg . |
10 |
56 |
560 |
| 5 |
Other veg |
10 |
40 |
400 |
| 6 |
Fruits |
30 |
100 |
330 |
| 7 |
milk |
24 |
32 |
40 |
| 8 |
Sugarjiggery Average |
24 |
43 |
95 |
| 9 |
Edibleoil.3varieties.average |
50 |
95 |
95 |
| 10 |
Fish |
120 |
300 |
150 |
| 11 |
meat |
120 |
240 |
100 |
| 12 |
egg |
2 |
3 |
50 |
| 13 |
Detergents/soap |
200 |
350 |
75 |
| 14 |
Cloth |
80 |
120 |
50 |
|
Average increase : |
174 |
8. The need based minimum wage computed on the basis of Dr Ackroyd
formula as on 1.1.2014 will be around Rs. 26,000 bringing about a gap of
almost 12,000 at the level of an MTS. We shall submit the details
thereof in our main memorandum.
9. The only Public Sector undertaking in which the wage agreement has
been reached in 2013 is the Coal India Limited. As per the said
agreement, the minimum wage at the lowest level of the worker as on
1.12014 is:
Basic Pay ——————————–Rs. 15, 712
Dearness allowance: ——-29.6%
Special allowance: ——— 4.0%
Special DA: ——————1.795%
Attendance bonus: ——-10%
Total: 49.395%————————– Rs. 7132.46
Total salary: —————————–Rs.22844.46
At the MTS level 22.844.46 x 130% —- Rs.29697.
10. As per the formula adopted by the 5th CPC, the minimum wage will work out to Rs. 22,857 as under:
A. Per Capita NNP at constant price for 2004-05 – Rs. 24,143
B. Per capita NNP at constant price for 2011-12 – Rs. 38,037
C. The increase registered over 8 years. – Rs. 13,894.
D. Percentage increase over 2004-05 – 57.54877.
E. Emoluments of an MTS as on 1.1.2014 – Rs. 14,000
F. 57.55% of Rs. 14,000. – Rs. 8,857.
G. Wage to be fixed in thecase of MTS as on1.1.14. – Rs. 22857.
From the above it is seen that Central
Government employees presently have a very depressed salary structure.
The final outcome of the deliberations of the 7 th CPC will become
available only by 2016. It is, therefore, needed that the employees have
to be compensated in the form of Interim Relief. In our opinion the
Commission may, as has been done by the various earlier Pay Commissions,
recommend atleast 25% of Pay in Pay Band plus Grade Pay as Interim
Relief subject to a minimum of Rs. 4000/-. Incidentally we may point out
that the grant of interim relief will enable the Government to spread
out the financial outlay on account of wage revision over a period of
more than three years.
We further urge that the Commission may
kindly recommended Interim Relief at the above rate subject to minimum
of Rs.2000/- to as pensioners and Gramin Dak Sevaks of Postal
Department.
SHIVA GOPAL MISHRA
Secretary, Staff Side, National Council JCM.
Source: http://ncjcmstaffside.com/wp-content/uploads/2014/06/Memorandum-for-IR-and-DA-merger_03.06.2014.pdf
