8th Pay Commission: 6 changes in dearness allowance calculation proposed by Staff Side

The Staff Side of NC-JCM recently proposed to the 8th Central Pay Commission (CPC) to recommend various changes related to dearness allowance calculation and payment. As the 8th CPC is months away from submitting its recommendations, this article takes a look at the six changes in DA calculation suggested by the Staff Side of the NC-JCM.

Changes in DA calculation

The Staff Side said DA must remain fully indexed to inflation. At present, it said, "the actual price is not taken in to account while calculating the Consumer Price Index (AICPI) as there are about 463 items which are used for arriving the Consumer Price Index, if the few items price rise take place and other items shows negative Price Rise as a whole its effects get neutralized.”

Presently, the average AICPI-IW data of the past 12 months is taken to calculate DA. The Staff Side said only 6 months’ average should be taken as DA is paid once in six months.

“The present calculation of Average 12 months should be replaced by 6 months average as the DA is paid once in 6 months,” the Staff Side said.

The DA calculation at present uses the AICPI data for Industrial Workers. However, the Staff Side said the consumption pattern of central government employees differs from that of industrial workers.

“Therefore, a separate consumption basket representing government employees should be constructed, with appropriate weights for essential expenditure heads such as food, housing, education, healthcare, and transportation.”

The Staff Side has also suggested that price data should be collected from open retail markets and cooperative outlets to ensure that the index reflects the actual prices paid by consumers rather than administratively determined prices.

“The prices should be calculated based on Market Rates and not on Government Rates which varies up to 25%," they said.

Currently, DA is rounded off to the lowest value after calculation. Staff Side said it said point to point.

“Point to Point DA should be provided, now DA is rounded off to lowest value. If the employees are eligible for 55.95 % DA, the DA Sanctioned in only 55% DA,” the Staff Side said.

Staff Side has also proposed the merger of DA with basic pay once it hits 25%. “We proposed that 8th CPC may recommend to merge if the DA / DR crosses 25% with Basic Pay and Basic Pension.”

Please note that the above proposals of the Staff Side have not yet been accepted by the 8th CPC. The Commission may or may not include these changes in its final report.