DA and CPI September, 2021

 The All-India CPI-IW for September, 2021 increased by 0.3 points and stood at 123.3 (one hundred twenty three point three). 

DA September, 2021 2021 is 32.32 %  

Commutation of Pension and need for revision of Commutation Table and Commutation Value

 

 Comrade ,

                    

Eligible- Rule position:

Basically, all the Central Government Employees are eligible to commute a percentage of his monthly pension amount, a Government servant shall be entitled to commute for a lump sum payment of an amount not exceeding 40% of his pension. If percentage of pension to be commuted results in fraction of a rupee, such fraction of a rupee shall be ignored for the purpose of commutation – Rule 5

No Government servant against whom departmental or judicial proceedings, as referred to in Rule 9 of the Pension Rules, have been instituted before the date of his retirement, or the pensioner against whom such proceedings are instituted after the date of his retirement, shall be eligible to commute a percentage of his provisional pension authorised under Rule 69 of the Pension Rules or the pension, as the case may be, during the pendency of such proceedings  – Rule 4

Commutation of Pension Formula

Total Commutation Amount = Commuted Amount  x  Commutation Factor x  12

Commutation Factor :  In the  CCS (Commutation of Pension) Rules, the Commutation factor value is given for  different ages, this table value is effective from 1.1.2006.

Commutation Factor Table

Two Tables available for Central Government Employees –

·        Table 1 is effective from 1.3.1971 – till 1/1/2006 - This Table is based on a rate of interest of 4.75 per cent per annum

 Commuted Value (CVP) = 0.4(Maximum) x P x CF x 12

where  P   = Pension Ordered            CF = Commutation Factor

 

For example in 1971 table 1 for employees retiring at 60 years they get a factor of 9.81

·        Table 2 is effective from 1.1.2006 as per the 6th Pay Commission

The table is based on a rate of interest on Commutation of Pension is 8.00% per annum. [Basic: LIC(94-96) Ultimate Tables and 8.00% interest]

For example in 2006  table 2 for employees retiring at 60 years they get a factor of 8.194.

Commutation of Pension Illustration as  per table 1: 

Note :Commuted Amount : Government Employee pension amount is Rs.32000/- at the time of retirement, he  / she commuted 40% of his pension, then the commuted amount is 40 percent of Rs.32000 i.e. 12800 is the commuted amount here.

Commuted Amount = Rs. 12800/-

Commuted Factor = Take Example, Age Next birthday is 61 years, then the commutation value is 9.81 as per the Commutation Table 

Total Commutation Amount = 12800 X 9.81 x 12

Total Commutation Amount = Rs 15,06,816 /-

Commutation of Pension Illustration as  per table 2: 

Commuted Amount = Rs. 12800/-

Commuted Factor = Take Example, Age Next birthday is 61 years, then the commutation value is 8.194 as per the Commutation Table 

Total Commutation Amount = 12800 X 8.194 x 12

Total Commutation Amount = Rs 12,58,598/-

So the pensioners are losing the Commutation Amount due to higher interest rates.  

If any employee / pensioner does not avail the  Commutation of pension in that case he gets  Rs 12800 X 180 months = 23,04,000/ - instead of lump sump amount of Rs 12,58,598/-   

Now the Government and LIC itself has lowered the interest rates from past fifteen years especially in last five years on small savings and LIC pension policy  they should have a new Commutation Table – 3 and Commutation Value with effect from1/1/ 2020. 

The interest 1/1/2006  was  of 8.0% in Public Provident Fund (PPF), 9.2 % in Senior Citizen Saving Scheme (SCSS), 11.3 % in National Saving Certificate (NSC) 

The interest 1/1/2016 was  of 8.1% in Public Provident Fund (PPF), 8.6 % in Senior Citizen Saving Scheme (SCSS), 8.1 % in National Saving Certificate (NSC) . LIC Pradhan Mantri Vaya Vandana Yojana (PMVVY) interest rate was 10%

 The interest as on 1/1/2020 is  of 7.1% in Public Provident Fund (PPF), 7.4% in Senior Citizen Saving Scheme (SCSS), 6.8% in National Saving Certificate (NSC). Even LIC of India has lowered its interest rates to 6.8%.  LIC Pradhan Mantri Vaya Vandana Yojana (PMVVY) interest rate is 7.4 % ,  LIC Jeevan Shanthi scheme provides 6% interest. 

 Hence there is a need to have a new Commutation Table number 3 with effect from 1/1/2020 considering the interest rates of 6.5 % instead of 8%.  

Restoration of Commuted Portion of Pension- Rule position:

The commuted amount of pension shall be restored on completion of 15 years from the date the reduction of pension on account of commutation becomes operative in accordance with rule 6:

Provided that when the commutation amount was paid on more than one occasion on account of upward revision of pension, the respective commuted amount of pension shall be restored on completion of fifteen years from the respective date(s)

Demands:

1)     Since already the Employees / Pensioners are paid less amount as the interest for commutation amount is deducted already at the time of making commutation payment through a commuted factor, there is no point for Restoration of Commuted Portion of Pension after 15 years.

2)      Restoration of Commuted Portion of Pension should ideally be done after 12 years.

3)     A new Commutation Table -3 with effect from 1/1/2020 as the lowering of interest rates has taken place especially last five years from 2016 onwards as Government and LIC itself has lowered the interest rates from past fifteen years, especially in last five years on small savings and LIC pension policies   

4)              The Commutation Table -3 should have interest rates of 6.5 % instead of present 8% and                Commutation Values shall be recalculated.

5)     The  Commutation Table and Commutation Value should be revised every 10 years as last revision has taken place in the year 2006 , now 15 years are over the revision is imminent due to lowering  in interest rates by Central Government and LIC  .  

                                                                           Comradely yours

                                                                          (P.S.Prasad)

                                                                        Working President

 

 

 

3% over the existing rate of 28% of the Basic Pay / Pension

 

Cabinet approves release of an additional instalment of Dearness Allowance to Central Government employees and Dearness Relief to Pensions, due from 01.07.2021

An increase of 3% over the existing rate of 28% of the Basic Pay / Pension

This will benefit about 47.14 lakh Central Government employees and 68.62 lakh pensioners

Impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be Rs.9,488.70 crore per annum

A study on Consumer Price Index , Dearness Allowance to Central Government employees & Impact on Covid, inflation on Central Government employees

 

Comrade,

                     Now it is time for 2021 index in consultation with stake holders including Central Government Employees Association, Trade unions, Bank Employees union etc.    .   The higher inflation above 4 %  has adversely affected the common man and the Central Government Employees even though DA is released for Government employees and Pensioners but it is not fully compensated due to higher inflation levels and the DA is released after six months of price rise , these six months we are not compensated for the price rise. For example if the consumer price index rises in Jan 2021 , we get paid in October 2021 as the increase in consumer price index from Jan to June is approved by union Cabinet in September, even there is an decimal is left over example if DA is increased by 2.95% , then we get only 2% DA against the price rise of 2.95% as these 0.95 will be carried over to next time . But whereas in Banks even the decimal is taken into account. So an average loss for the Central Government Employees and Pensioners is about Rs 5000 in a year due to rounding of DA to lower levels rather than higher levels.                           

                The Covid situation has resulted in higher inflation in the year 2020 especially during the period  due to various factors like shut down of industrial units due to lockdown , which has resulted in the gap between demand and supply which is the one of the causes of higher inflation, the second aspect is that food production has also gone down excess rains, lockdown, the gap between demand and supply  etc.

            In the year 2021 the higher inflation is due to rise in prices of petroleum products and higher taxation by both Central Government and State Governments  on Petrol and Diesel. This has resulted in higher inflation.   This paper has been prepared to study the impact of new consumer price index on Government employees and the need for new consumer price index 2021.

           The inflation rate along with the inflation in the food basket is at as per data released by the Ministry of Statistics & Programme Implementation (MoSPI) website  . http://mospi.nic.in/

The details are taken from the labour bureau website:   http://labourbureau.gov.in the comparison has been made for let us study five years data available with us.

 

 

Month	Retail Inflation %	Consumer Food Price Index (CFPI) in %
June 2016	4.20	The inflation in the food basket is at 3.32
June 2017	2.18	The inflation in the food basket is at -1.05
June 2018	5.00	The inflation in the food basket is at 2.91
June 2019	6.09	The inflation in the food basket is at 7.87
October 2019	4.62	The inflation in the food basket is at 7.89
December 2019	7.35	The inflation in the food basket is at 14.12
July 2020	6.93	The inflation in the food basket is at 9.82
November 2020	6.93	The inflation in the food basket is at  9.5
December 2020	4.59	Food inflation declined to 3.41
January  2021	4.06	Food inflation declined to 1.89
Feb 2021	5.03	Food inflation declined to 3.87
March 2021	5.52	Food inflation declined to 4.87
April 2021	4.29	Food inflation declined to 2.02
May 2021	6.30	Food inflation is at 5.01
June 2021	6.26	Food inflation is at  5.15
July 2021	5.59	Food inflation is at  3.96
August 2021	5.30	Food inflation is at  3.11

  

Let us study the All India year-on-year inflation rates (%) for August 2021 (Base: 2012=100)

http://mospi.nic.in/sites/default/files/press_release/CPI_PR_13sep21.pdf

 

Description	Aug. 20 Index	Aug. 21 Index	Inflation Rate (%)
Food and beverages	158.0	164.0	3.80
Pan, tobacco and intoxicants	184.4	191.7	3.96
Clothing and footwear	152.0	162.4	6.84
Housing	156.3	162.4	3.90
Fuel and light	142.9	161.4	12.95
Miscellaneous	150.0	159.6	6.40
Items in Miscellaneous
Household goods and services	148.7	156.8	5.45
Health	155.6	167.7	7.78
Transport and communication	139.6	153.9	10.24
Recreation and amusement	146.6	156.1	6.48
Education	157.5	163.5	3.81
Personal care and effects	158.4	160.0	1.01

 

 

 

 

 

 

 

 

Comparison of one year increase August 2019 – August 2020

Groups	Aug, 2019	Aug, 2020	Increase in points	Weightage 2001	Increase in % as per 2001 index	Weightage 2016	Increase in % as per 2016 index
Food Group	330	352	22	46.2	10.16	39.2	8.62
Education,   health Pan, Supari, Tobacco & Intoxicants	391	408	17	23.3	3.96	30.3	5.15
Fuel & Light	282	299	17	6.6	1.12	6.1	1.03
Housing	434	465	31	15.3	4.74	16.9	5.24
Clothing. Bedding & Footwear	226	230	04	6.4	0.256	5.5	0.22
Miscellaneous Group	254	260	06	2.3	0.138	2.1	0.125
General Index	320	338		100	20.374	100	20.385

The price rise in 2019-20  year is not only increasing in food with 22 points , but also in housing which has shown price rise of 31 points,  both Miscellaneous and fuel increased by 17 points . So we cannot say that food basket alone will contribute to higher Consumer Price Index

The reduction in food basket is taking place in 1982 it was 57%, it was reduced to 46.2% in 2001 and now in 2016 it is 39.17%, The increase in miscellaneous basket is taking place in 1982 it was 16.36 %, it was increased to 23.26 % in 2001 and now in 2016 it is 30.3 % The housing allocation has increased from 15.3 to 16.9 this is good move in a long run may be 2020 -21 we are not seeing enough increase.  The decrease in Fuel and light   from 6.43 % to 5.5 % has affected us.  

We can notice in the year 2020 the inflation rate is much higher than the year 2019 , especially the inflation in the food basket. However we can notice in  that in last five years the inflation in the food basket is less than the inflation rate & also we can notice that in Dec 2020 to August 2021 the food inflation has decreased compared to 2019-20 levels, so we should not allocate more percentage on food basket ,  as  the vegetable prices varies from one place to another and on a monthly basis / seasonal basis it changes so it is difficult to predict the impact of food prices on DA for example the prices of the onion/ tomato/ potato will be varying from Rs 10 per kg to Rs 100 per kg in a year. The prices of food articles such as rice, wheat , pulses are steady increase. The other food articles such as oil etc rise and fall depending upon the production. Expenditure on food consumption by industrial workers has fallen significantly in 15 years from 45% to 36% with corresponding increase on non-food items,

The Union government has changed the base year for the consumer price index for industrial workers (CPI-IW), which will affect the minimum wage of private sector workers and Dearness allowance (DA) of government employees without consulting the trade unions. The CPI-IW (2016=100) series replaces the CPI-IW (2001=100) series. As per the recommendations of the International Labour Organization (ILO), Index Review Committee (IRC) and National Statistical Commission (NSC), the base year of price index numbers should be revised at frequent intervals, generally not exceeding 10 years to reflect the changes that take place in the consumption pattern of consumers. Earlier to this revision, the series were also revised from the year 1944 to 1949; 1949 to 1960; 1960 to 1982 and 1982 to 2001 since inception of Labour Bureau.

All India index for the month of September, 2020 stands at the level of 118 and linking factor for the conversion of new series index to previous series on base 2001=100 is 2.88. (AICPIN for month September 2001-100 based is 340) The CPI-IW (2016=100) series replaces the CPI-IW (2001=100) series. 

The life style of the people has changed considerably in past two decades, the purchasing priority has changed from food and other items as television, mobile, transport, entrainment, health etc.     But the trade unions were never consulted by the Government at any stage in either the in 2001 and 2016 index formation.

The number of centres are also increased from 78 to 88 centres. The number of States/UTs has increased to 28 under 2016 series as against 25 in the 2001 series. The sample size was increased from 41,040 families to 48,384, and the number of selected markets for collecting retail price data from 289 to 317. The number of items directly retained in the index basket has increased to 463 items as against 392 items in the 2001 series. This may dilute the effect of raise in prices in in a  particular item.

 

So we should increase the allocation on Household goods and services, Fuel and light  Clothing and footwear, Health, Transport and communication rather than only concentrating on food. 

The Covid has affected the entire world which had resulted in economic fallout , India has also been affected which has resulted in economic impact on the working class , poor people , Government employees were also affected by it , which has impacted the life of the working class , poor people ,  as many industrial units were shut down , business was its lowest this has pushed up the inflation levels. 

The higher inflation above 4 %  has adversely affected the common man and the Central Government Employees even though DA/DR  is released for Government employees and Pensioners but it is not fully compensated due to higher inflation levels and the DA / DR  is released after six months of price rise , these six months we are not compensated for the price rise   .  

The prices are calculated as per Government rates, not on prevailing market rates, net difference of price rise about 30 % which is always we are denied right from 1960 to till date .

The overall the Government employees and pensioners are affected due to price rise and higher inflation as they are not fully compensated against this. The CPI-IW (2016=100) series replaces the CPI-IW (2001=100) series. This revision has taken place after 15 years.  The consumer price index weightage should be re indexed every 5  years (five years ) so that the employees and pensioners will get proper DA / DR the last index has taken place in the year 2016 . Proper linking factor should also be provided.  Now it is time for 2021 index in consultation with stake holders including Central Government Employees Association, Trade unions, Bank Employees union etc.    .   

                

                                                                                      Comradely yours

                                                                                         (P.S.Prasad)

                                                                                     Working President