The concept of Dearness Allowance (DA) was incorporated in some form around World War II and has been institutionalized in the country reasonably well. It is given to central government employees, state government employees, public sector undertakings (PSUs) and to almost all other government-connected organizations directly or indirectly.
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- There is some method of this type of compensation in some private sector organizations as well.
While norms may vary, the concept of DA is primarily meant to compensate the employees for inflation to meet the increased cost of their sustenance. The current method of DA needs two immediate modifications, even in its current form, as under:
Uniform approach to compensation
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If DA is supposed to offset the rising inflation and assist the employees with their sustenance, the following must be done:
Fixed amount vs percentage of pay: The current method of DA calculation needs to be critically analyzed. The percentage of DA is based on the upward rise of the Customer Price Index (CPI), which is calculated on a monthly basis. There is a list of certain items whose price movement is recorded at different locations which are thereafter used to calculate the CPI value of a particular month. For the central government employees, the data of six months is used to declare the DA percentage and given to the employees and pensioners every January and July.
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The negative part is that this DA is given based on the basic salary/pension of the employee in percentage terms, while real inflation affects everyone equally. There is a need to calculate this inflation basket more realistically and compensate all the employees equally without linking it to the percentage of pay/pension.
Common value to all: As Goods and Services Tax (GST) has been evolved after a lot of effort having been put in to reach a consensus, a similar effort is needed for DA as well.
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All employees/pensioners/nationals must be compensated with this common value as inflation hits everyone. So much so that even beneficiaries of Direct Benefit Transfer (DBT) should also be equally compensated. The current norm of DA being given at different values as well as timing must be synchronized for the entire nation.
Time sensitivity: Data for the CPI index is calculated on a monthly basis. With the current state of network connection and automation, there is no reason as to why CPI can not be calculated by the seventh of every month for the previous month. Not only this, if CPI data is available so early, why has it become a common practice to announce the DA in the month of March/April due from January 1 and in the month of September/ October due from 01 Jul, needs to be pondered over. When the Government advocates ‘Minimum Government and Maximum Governance’, why can’t the authority be delegated to the Foreign Minister to approve the DA based on the agreed formula and announce the same by 15th of January and July, so that there is no concept of arrears and the money reaches the beneficiary well in time. It must be understood that DA is meant to protect against the inflation which the individual has already suffered in the previous six months. The delay in announcement and arrears being the basic norm, needs to be done away with. The cabinet can retain the power to veto the approval by the FM in case of an extraordinary situation, like the one which arose during the Covid-19 pandemic. The current practice of issuing separate orders by various departments of the central government after the issue of orders by the finance ministry is another retrograde step and needs to be changed without further delay.
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The larger issue is a little different. It stuck in my mind once again once Air India was privatized after facing successive revenue losses year after year. I thought that private entrepreneurs and employees are probably made of different flesh and blood as compared to those in the government.
All my inputs so far suggest otherwise.
In fact, it is a harsh truth that all human beings are made of similar flesh and blood, whether they are in the government or in the private sector. While there is nothing bad in the private sector running the majority of businesses, a number of privatizations are taking place due to the government failing to sustain them. It is obvious that there is something missing in government employees as compared to those in the private sector.
While job assurances, financial growth and reasonable career progression avenues could be some reasons without linking these benefits to the actual performance,this article is examining a simple phenomenon of entitlement of DA. As against this entitlement of DA, why not the employees be given this part of allowance in the form of ‘Growth Allowance (GA)’ wherein based on percentage of national growth or lack of it, the employees be compensated.
The GA could be based on multiple models, two of which are covered as :
GA based on GDP: The country calculates the annual GDP growth year after year. Once it is calculated, the same percentage/value increase based on the GDP increase will be given to all the employees/pensioners. For example, if GDP growth is 6% in a year, the same growth will be given to all citizens of the country. It is hoped that this will incentivise the employees/workers at least to some extent.
GA based on individual sector growth: To have more connection and participation, GA could be based on individual sector/organization-based annual growth. For example, if Air India grows by 4%, every employee should be given this GA allowance. If it dips by 2%, a negative allowance should also be combined with the pay/ pension. The department not having measurable growth could be compensated by a weighted formula of all other sectors/be related to GDP.
It is essential, on one hand, to understand major reforms related to the present day DA regime as has been advocated and recommended above. It would be more prudent that this compensation/allowance now be based on the GA model so that all citizens feel responsibility in the growth of the nation to get appropriate compensation/reward/allowance.
