Lakhs of government employees and pensioners are keenly awaiting the reply of the State Government to the recent Kerala Administrative Tribunal (KAT) order, directing it to specify a date when it could clear all the pending six instalments of Dearness Allowance to the employees. If the government fails to submit a written reply before December 11, when the case comes up for hearing again, then the tribunal itself will fix a date for it to release the DA arrears for the employees, a bench headed by KAT Chairman Justice C K Abdul Raheem stated in its interim order. The tribunal was considering a petition filed by NGO Association President Chavara Jayakumar, General Secretary A M Jaffer Khan, and Treasurer Thomas Herbit.
The plea was filed, arguing that the financial crisis or treasury restrictions shouldn’t be cited as a reason for not clearing the dues. Though there were many instances when the government failed to extend one or two instalments of the DA hike, it was the first time six instalments of DA, that since January 2021, had not been paid. The employees are now getting only 7% DA instead of 25%.
Earlier, the Centre had frozen the DA hike for central government employees during the one-and-a-half years period from January 2020, taking into consideration the Covid-19 pandemic situation. But the Centre did so after issuing an order that the DA hike would be reinstated from July 2021 onwards and that arrears regarding to the one-and-a-half years won’t be provided. It reinstated the DA from the promised date and the employees continue to get a DA hike twice a year thereafter. No other state has such long pending DA arrears to clear as Kerala. It seems the State has willfully chosen to forget the fact that the DA hike is extended to help the employees cope with the inflation and is a basic social policy measure.
Why DA? How it’s calculated?
The DA hike is extended to employees at specific intervals as a cost-of-living adjustment to offset the impact of inflation. It is determined on the basis of the All India Consumer Price Index (AICPI). Both the Central and the State governments use this criterion to determine DA, which is the percentage increase in the consumer price index from the month in which salary revision comes into effect. As per the provisions, the DA should be revised twice every year – in January and July. It’s calculated based on the average AICPI for the previous year. The latest declared annual AICPI average is for the period from July 2022 to June 2023 – 382.25 points. This is used to calculate the DA for six months from July 2023. Similarly, to determine the DA from January 2024 onwards, the average AICPI for the period from January 2023 to December 2023 is used. So far this year, the AICPI points for the months till October have been declared, and that regarding November and December is yet to come.
While the average AICPI in January 2016, when the pay revision for Central Government employees was carried out as per the 7th Central Pay Commission (CPC) recommendations, was 261.42 points, in July 2019, when the State Government implemented the 11th pay revision, rose to 306.08 points. The DA equivalent to consumer price index points till then would be merged with the revised basic salary. The increase over and above this will be converted to percentage points and later allocated as DA. Thus, the DA hike is calculated from different AICPI point levels, which explains the difference in the DA amount allocated by the Centre and the State.
As per this, with the average AICPI touching 382.25 points in July 2023, the Central DA should be hiked to 46% (46.22%; the percentage rise from 261.42 points), and the State DA 25% (24.88 %). While the Centre provides the entire 46% DA, the state government employees even now are getting just 7% DA, which was originally applicable to the period from July to December 2020. Since the method for calculating DA based on price index is clearly stated in pay revision commission reports, it’s legally not possible to effect changes in DA rate as per the financial condition of governments. For that reason, the denial of a DA hike, to be ideally provided once in six months, to help employees tide over the rising cost of living due to inflation is a violation of the law.
Will the DA amount be less if the index price falls
Generally, the employees are allocated a hike in the Dearness Allowance and not a reduced amount than what they are getting. At the same time, the price index varies both in the upward and downward direction as well. Still, why is it that the DA amount provided to employees never gets reduced?
If we take the figures for each month, then we can notice that the price index falls on certain occasions. However, the DA is calculated on the average price index points for a full year. Even if the price index falls in certain months, overall it will show an upward trend, and this is why the employees always get a DA hike. If at some point the annual average price index falls, it will be reflected in the DA amount as well.
DA at par with Centre: will the argument hold water
One argument that’s often raised is that the states should make DA at par with the Centre. At each phase, DA is determined based on how much share of the price index is merged with the revised basic salary while effecting a pay revision. Only in those states which implemented a pay revision, merging the DA equivalent to the price index till January 2016, based on which the Centre implemented the 7th pay commission recommendations, with the revised basic salary, the DA will be at par with the Centre. Hence, it is unreasonable for those in other states to demand a DA on par with the Centre.
Bengal DA arrears case in Supreme Court
West Bengal is another state where protests have been going on for the non-release of DA dues of government employees. In 2022, the State Administrative Tribunal passed an order against the State Government in a case filed by the employees there. Though the government approached the Calcutta High Court citing financial crisis, the court directed it to pay the dues within three months. The government has now approached the Supreme Court against this. The case, which has been put off several times, is scheduled to be heard by the Supreme Court in February 2024.
HRA increase with next Central DA?
Central Government employees who are currently getting 46% DA are eagerly waiting for the next DA announcement. This is because, as per the provisions of the 7th Pay Commission for Central Government employees, when the DA reaches 50 per cent, the House Rent Allowance (HRA) will be increased. HRA is provided at different rates in different cities. This is because the cost of living, including house rent, will increase in big cities. Hence, cities have been divided into three categories, X, Y, and Z, based on their population.
Nine cities, including metro cities like Delhi, Mumbai, and Bengaluru, fall under category X. There are no cities in Kerala that fall under this category. There are 97 cities in the country in category Y. All other places fall under the Z category. Currently, the HRA is 27%, 18%, and 9% in X, Y, and Z cities, respectively, as per the Seventh Central Pay Revision. According to the Pay Commission, if the DA crosses 50%, HRA will go up to 30%, 20% and 10% respectively.
The Central DA is currently at 46 per cent. The price index, which hit an annual year average of 382.25 points by June, rose to 391.3 points in October. If the price index for November and December is also announced, the central DA will cross 50% if the annual average rises to the level of 392.13. This is more likely considering the current rate of inflation. If that happens, there will be a 3%, 2%, and 1% increase in HRA in X, Y, and Z cities, respectively, along with a 4% DA increase.
Price index and DA rates
Below is the DA sanctioned by the Central Government the outstanding DA in the state and the price index for the respective period. The Central Government will avoid decimals by following the method of doing lower rounding to the integer. Since it is an upper rounding method in the state, if it is above half a per cent, it will be considered as one per cent. In the chart below is the actual increase, with the rate rounded to the integer shown in the bracket.
