Big update on the 8th Pay Commission! The All India Defence Employees' Federation (AIDEF) is demanding a new formula to calculate DA and DR. They have submitted a second supplementary memorandum to the commission.
The All India Defence Employees' Federation (AIDEF) has submitted a second supplementary memorandum to the 8th Pay Commission. They are demanding a complete review of how DA and DR are calculated for government employees and pensioners. If the government accepts their recommendations, the entire calculation for Dearness Allowance and Dearness Relief will change.
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What is the current DA/DR calculation method?
Currently, the government revises DA and DR using the 12-month average of the AICPI-IW. This is the All India Consumer Price Index for Industrial Workers. This index was originally designed to protect the purchasing power of industrial labourers.
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What's the big flaw in the current index?
According to AIDEF, this index does not accurately show the real cost of living for central government employees and pensioners. The federation argues that an index made for industrial workers doesn't match the spending patterns of government staff. This is why the organisation is demanding a change in the calculation method.
In the revised Consumer Price Index basket for 2022-23, food and beverages have a weightage of only 36.75%. On the other hand, the combined weightage for housing, healthcare, transport, communication, and digital services is comparatively higher.
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More pressure on low-paid employees
AIDEF has pointed out that employees and pensioners with lower incomes spend a much larger part of their monthly earnings on food, medicines, healthcare, education, and house rent. As a result, the official index fails to capture their actual experience with inflation.
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The problem is deeper for pensioners
Retired employees spend a big chunk of their monthly income on health insurance premiums, medicines, medical treatments, and elder care. If these costs rise faster than overall inflation, the DR revision is not enough to protect their purchasing power.
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Proposal to create an employee-specific price index
To solve this problem, AIDEF has proposed creating a separate, employee-specific cost of living index. This new index would be designed by considering the actual spending patterns of government employees and pensioners.
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Demand to recognise elder care expenses
The federation has demanded that future pay and pension revisions must give special importance to costs related to elder care. They say this is crucial for the financial security of the growing elderly population.
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Recommendation for change in fitment factor too
AIDEF has also proposed that the fitment factor, which is used to determine salary and pension hikes, should include the changing spending patterns of employees. This will make the revision more realistic.
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What is the next step for the 8th Pay Commission?
The 8th Pay Commission is currently examining the representations from various employee organisations and pensioner associations. Its recommendations are expected to decide the future of the salary structure and retirement benefits for central government employees and pensioners.
