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 Agan/val, 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
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.
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.
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.
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%, whereas 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 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
|
Sugar,jiggery. average
|
24
|
43
|
95
|
9
|
Edible oil.3 varieties.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
