Dearness Allowance & Consumer Price Index 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 0.68% 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 6 ½  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 25 2 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 Kodikunnil

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 Subbarao 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, 03.47am IST

•    http://articles.economictimes.indiatimes.com/2011-07-19/news/29790925_1_cpi-iw- retail-inflation-wpi-and-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-IW,  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 if 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 foolproof, 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 proof “, said Arup Mitra, 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 Ila 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.

Sl. No	Sub group/ Item	Rural	Urban	Combined (Rural+Urban)
FOOD  ITEMS
01	Cereals and products	19.08	8.73	14.59
02	Pulses and products	3.25	1.87	2.65
03	Milk and milk products	8.59	6.61	7.73
04	Oils and fats	4.67	2.89	3.90
05	Egg, fish and meat	3.38	2.26	2.89
06	Vegetables	6.57	3.96	5.44
07	Fruits	1.90	1.88	1.89
08	Sugar etc	2.41	1.26	1.91
09	Condiments and spices	2.13	1.16	1.71
10	Non- alcoholic beverages	2.04	2.02	2.03
11	Prepared meals etc	2.57	3.17	2.83
12	Pan, tobacco and Intoxicants	2.73	1.35	2.13
	Food, beverages and tobacco	59.31	37.15	49.71

Sl. No	Sub group/Item	Rural	Urban	Combined (Rural+Urban)
Miscellaneous ITEMS
01	Fuel and light	10.42	8.40	9.49
02	Clothing and bedding	4.60	3.34	4.05
03	Footwear	0.77	0.57	0.68
04	Housing	Nil	22.53	9.77
05	Education	2.71	4.18	3.35
06	Medical care	6.72	4.34	5.69
07	Recreation and amusement	1.00	1.99	1.43
08	Transport and communication	5.83	9.84	7.57
09	Personal care and effects	3.05	2.74	2.92
10	Household requisites	4.48	4.30	4.40
11	Miscellaneous	24.91	28.00	26.31

Sl.No	ItemCode	Desc
1	101011	rice 1 (other than PDS)
2	101012	rice 2 (other than PDS)
3	101021	chira
4	101041	muri / murmura
5	101061	wheat (loose) -other than PDS
6	101062	wheat(loose)- other than PDS
7	101071	wheat atta(other than PDS)
8	101081	maida
9	101091	suji / rawa
10	101121	bread: bakery
11	101141	jowar
12	101151	jowar product (specify)
13	101181	maize
14	101241	ragi
15	101251	ragi product (specify)
16	101261	other cereals (specify)
17	101281	grinding charges
18	102011	arhar/ tur
19	102021	gram: split
20	102031	gram: whole
21	102041	moong
22	102061	Urd
23	102101	other pulses (specify)
24	102131	other pulse products(specify)
25	103031	groundnut oil
26	103041	coconut oil (edible)
27	103051	other edible oil(saffola/ sunflower etc.) specify
28	104011	eggs
29	104021	fish (fresh)
30	104022	fish (fresh)
31	104023	fish (dry)
32	104031	goat meat / mutton
33	104041	beef
34	104051	buffalo meat
35	104071	chicken
36	105011	milk (pasteurized)
37	105013	milk (non-pasteurized  -cow)
38	105051	curd
39	105061	ghee
40	105091	other milk products (specify)
41	106011	salt
42	106021	turmeric
43	106031	black pepper
44	106041	dry chillies
45	106051	tamarind
46	106061	curry powder
47	106071	oil seeds
48	106081	other spices: like jeera
49	106082	other spices: like dhaniya
50	107011	potato
51	107021	onion
52	107031	radish
53	107041	carrot
54	107061	beet
55	107091	pumpkin
56	107101	gourd
57	107111	bitter gourd
58	107121	cucumber
59	107141	jhinga, torai
60	107181	cabbage
61	107191	brinjal
62	107201	ladys finger
63	107211	palak
64	107221	other leafy vegetables (specify)
65	107231	french beans
66	107251	tomato
67	107271	chillis: green
68	107311	lemon
69	107321	garlic
70	107331	ginger
71	107341	other vegetables(specify)
72	108011	banana
73	108031	watermelon
74	108051	coconut
75	108081	orange
76	108091	mausami
77	108111	mango
78	108171	apple
79	108181	grapes
80	108191	other fresh fruits (specify)
81	108201	coconut: copra
82	108211	ground nut
83	109011	sugar
84	109021	gur
85	110011	tea: leaf
86	110021	coffee: powder
87	111011	tea: cups
88	111021	coffee: cups
89	111071	coconut: green (tender)
90	111081	other beverages (specify)
91	111091	biscuits
92	111101	salted refreshments: specify
93	111102	salted refreshments: specify
94	111103	salted refreshments: specify
95	111111	prepared sweets: specify
96	111112	prepared sweets: specify
97	111113	prepared sweets: specify
98	111114	prepared sweets: specify
99	111121	cooked meals
100	111151	pickles
101	111161	sauce
102	111171	jam / jelly
103	111181	other processed food (corn flakes etc) specify
104	112011	pan: leaf
105	112031	supari
106	112071	bidi
107	112081	cigarettes (filtered)
108	112082	cigarettes (non- filtered)
109	112101	leaf tobacco
110	112151	other tobacco products (specify)
111	112201	foreign liquor/refined liquor(Indian made)
112	201021	firewood and chips
113	201031	electricity (std. unit)
114	201041	kerosene (open market)
115	201051	match box
116	201071	LPG cylinder (domestic)
117	201091	candle
118	201101	other fuel (specify)
119	401011	dhoti
120	401021	sari
121	401031	cloth for shirt
122	401032	cloth for pyjama
123	401034	cloth for blouse
124	401041	cloth for coat (woolen)
125	401042	cloth for pant/trousers
126	401061	lungi
127	401071	towel/gamchha
128	401081	vest/banian (gents)
129	401082	brief/underwear (gents)
130	401083	socks (gents)
131	401091	ready-made shirt
132	401092	ready made pant/trousers/jeans
133	401093	ready made skirt/ frock(child 6-10 years)
134	401094	ready made top (ladies)
135	401095	ready made salwar suit
136	401101	sweater/ pullover (gents)
137	401102	sweater/ cardigan (ladies)
138	401121	bed sheet
139	401131	blanket
140	401992	clothing others (specify)
141	401993	mats & matting
142	402011	leather shoes (gents)
143	402012	leather shoes (children)
144	402021	leather sandals/chappals (gents)
145	402022	leather chappals (ladies)
146	402023	leather sandals/chappals (children)
147	402031	rubber/ PVC footwear (gents)
148	402032	rubber/ PVC footwear (ladies)
149	402041	other footwear (sports shoes etc.) specify
150	402990	other leather footwear (specify)
151	501011	pain killer tablet (allopathic)
152	501012	cough syrup: coscopin plus (above 8 years of age)
153	501013	vitamin B complex: tablet
154	501014	anti fever tab. (allopathic)
155	501015	anti biotic tab (allopathic)
156	501016	cough syrup (homeopathic)
157	501018	tonic (homeopathic)
158	501019	chavanprash
159	501021	X-ray(chest) Posterior to anterior view
160	501022	ECG
161	501023	lipid profile test
162	501024	blood sugar (fasting & pp) test
163	501031	doctor’s fee (first consultation)
164	501990	hospital/nursing  home charges
165	501991	other medical expenses (specify)
166	502011	primary (5th class) mathematics book
167	502012	primary (5th class) science book
168	502013	primary (5th class) local language book
169	502014	secondary (10th class) mathematics book
170	502015	secondary (10th class) social science book
171	502016	secondary (10th class) science book
172	502017	first year (B.A.) economics book
173	502018	first year ( B. Com) accountancy book
174	502019	first year (B.Sc.) mathematics book
175	502021	newspapers: local
176	502022	news paper : national
177	502023	periodicals/magazines
178	502041	copy/ note book
179	502042	register
180	502043	pen
181	502044	pencil
182	502051	tuition fees (fifth class)
183	502052	tuition fees (tenth class)
184	502053	tuition fees (first year graduation)
185	502061	private tutor fee (primary)
186	502062	private tutor fee (secondary)
187	502063	coaching (professional courses fee)
188	502990	other educational expenses (specify)
189	503011	cinema: new release (normal day)
190	503021	foot ball
191	503022	cricket bat (regular size)
192	503023	lawn tennis racket for beginner
193	503024	carrom board
194	503025	playing cards
195	503051	hiring charges for CD/DVD video cassettes
196	503061	monthly charges for cable TV connection
197	503071	transistor/satellite radio
198	503081	television
199	503992	other entertainment(specify)
200	504011	telephone charges: same operator
201	504021	mobile phone charges : same operator
202	504022	mobile phone charges : different operators
203	504061	taxi fare
204	504062	auto-rickshaw fare
205	504091	petrol
206	504101	diesel
207	504111	lubricating oil/engine oil
208	504121	school bus/van
209	504141	motor cycle (without accessories)
210	504142	scooter (without accessories) cost on road
211	504151	motor car (without accessories)
212	505051	toilet soap
213	505061	tooth brush (adult)
214	505062	tooth paste
215	505071	telcome powder
216	505072	snow / cream
217	505073	lipstick
218	505074	body lotion
219	505081	hair oil
220	505082	hair dye
221	505083	shampoo
222	505101	shaving blades
223	505102	shaving razor
224	505121	sanitary napkins
225	505131	other toilet articles: (freshener / perfume) specify
226	505141	flower (fresh)
227	506011	electric bulb
228	506012	tube light (without fitting)
229	506041	plastic bucket
230	506051	washing soap / detergent
231	506061	other washing requisite(brush/cleaner etc)
232	506071	agarbati
233	506081	mosquito repellant / insecticides
234	506091	other petty articles (broom etc.) specify
235	506101	domestic servant
236	506121	miscellaneous expenses: photocopying charges
237	506122	other consumer services: driver (car)
238	506123	other consumer services: cleaner (car)
239	506124	other consumer services: cobbler(shoe repair)
240	506141	iron almirah
241	506181	gold
242	506201	stainless steel (cooking pot)
243	506202	stainless steel (plate)
244	506301	refrigerator
245	507011	hair cutting charges (gent)
246	507012	hair cutting charges (ladies)
247	507021	washerman / laundry
248	507022	ironing charges
249	507031	tailoring charges for gents pant:
250	507032	tailoring charge for gents shirt:
251	507033	tailoring charges for ladies suit:
252	507034	tailoring charges for blouse: