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Dearness Allowance and Consumer Price Index – Analysis by Confederation

Dearness Allowance and Consumer Price Index – Analysis by Confederation of Central Government Employees and Workers Karnataka State

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.

 

Comradely yours
Sd/-
(P.S.Prasad)
General Secretary
9480066620
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.

CPI—All India weights -2011

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
From  the  above  it  is  quite  clear  there is no  weightage for rural housing &
Miscellaneous weightage is much more than required. Which is effecting DA calculation.
List of 252 Items
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:

Source: Confederation of Central Government Employees and Workers Karnataka State

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