Mechanism Of Merger Of DA With Basic Pay

How does the mechanism of merger of D.A. with Basic Pay work?

There are several factors that come into play, while resetting the revised D.A. rate per slab and accordingly, the revised D.A. percentage.

1. After merger of certain portion of D.A. (may be 100% or less than that) with the existing Basic Pay, the revised Basic Pay becomes higher. So, on this higher amount, the new D.A. is calculated. As a natural consequence, the revised D.A. rate per slab is not exactly equal to the pre-revised rate per slab.

2. Presuming that the merger of D.A. at 4440 points of AICPI is final, the revised Basic Pay becomes 1.6015 times the present Basic Pay (Existing Basic plus 60.15% of D.A. thereon). Then, instead of 0.15% per slab, the new D.A. is calculated at 0.15/1.6015. This is equal to 0.094% per slab. 

3. However, if more than 100% neutralisation is envisaged, the D.A. per slab goes up further. For instance at 125% neutralisation, the D.A. slab per slab will become 0.12%.

4. The residual D.A. will also undergo change. For example, the residual (unmerged) portion is 32%, it will be become less according to a mutually agreed formula. If the revised D.A. is 18% basing on 100% neutralisation, it may become 21.6% of the revised Basic Pay with 125% neutralisation.

5. Thus, the aggregate of new Basic Pay and the new D.A. in absolute terms is usually fairly higher than the aggregate of the old Basic Pay and the old D.A.

6. It is the responsibility of the negotiating parties from the Trade Unions side to ensure that after readjusting the D.A. rate per slab, there is not less than 100% neutralisation at all levels. In other words, all the staff members regardless of their rank and pay get uniform benefit (proportionate rate of rise or fall) basing on their (revised) Basic Pay, whenever there is a change in the AICPI.

7. For central government staff, their D.A. is calculated at half-yearly intervals, but it takes into account the yearly average up to the preceding month. To elaborate, for D.A. from 01-07-2014, the average of AICPI for the 12 month period ending 30-06-2014 is reckoned. For D.A. from 01-01-2015, the average of AICPI for the 12 month period ending 31-12-2014 is taken into account.

8. Since yearly average is always more stable than the quarterly average, there is always a rise in D.A. for central government employees, so long as the annual rate of inflation is positive (greater than 'Zero'). For bank staff, there is a possibility of the average AICPI for a particular quarter becoming lower than the preceding quarter's average. In such an eventuality, bank staff witness a fall in their D.A. percentage. So, central government employees never face a reduction/fall in their existing D.A.

9. If you study in depth, for central government employees, there is no time lag in the period of reckoning. In their case, the AICPI until the immediately preceding month is included for arriving at the D.A. for the current month. But, in case of bank staff, there is always a time lag of 1 month. To illustrate further, strictly speaking, for calculating D.A. of bank staff from 01-05-2014, the average AICPI for the Quarter ended 30-04-2014 is to be taken. Instead, the average AICPI for the Quarter ended 31-03-2014 is taken, leaving one month in between.

10.As I have been repeatedly emphasizing, it is the duty of the Trade Unions to ensure that there is no loss in the revised D.A. pattern. But more attention must be paid for bargaining maximum hike in Basic Pay.  Here, the load factor becomes important.  If maximum hike could be secured by allocating a greater portion of the additional load to Basic Pay, after merger of D.A. in full or in part, it will automatically take care of the revised D.A, HRA, CCA, FPP, PQP, future increments, leave encashment, commuted pension, monthly pension, family pension and above all, the future pay scales, whenever there is any further wage revision.

Date:14-04-2014                                                                                                                    pannvalan