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Monday, 16 July 2012

DA Formula Rectification & Revision of Wages

Price rise in last six years is 152%.
Total increase in Consumer Price Index is 90 points.
Total DA due is 70 % as 1/6/12

       The  Confederation has  prepared a comparative chart of the price of 14 commodities, which go into the computation of minimum wage.  for more details see Confederation web sitehttp://confederationhq.blogspot.in/ Placed there-under is the computation of the Minimum wage on the basis of the prices of the requisite articles as in January, 2012.  It could be seen there-from that while the prices on an average registered an increase of 152% the DA compensation had only been 65%. This fact may kindly be used to bring home the necessity of revision of wages immediately.  .CLICK here for more information

The prices of the commonly used items of the common man  has risen from 100% to 250% from last six years, where as the  Consumer Price Index  numbers has risen only by 90 points in last six years, We can observe that many of the common  used items such as Rice, Wheat, tamrind, electricity bills ,water bills payments etc are missing in the Consumer Price Index Numbers  weight-age  , the miscellaneous  weight-age  is 25 % instead of that it should have been distributed  in Fuel, Oils, vegetables. Housing etc, improper house rent rates are reflected in CPI the cost of  a single dwelling in metros is Rs 8000, where as the Government rates of HRA is taken into account while commuting the CPI.

The compilation of Consumer Price Index  numbers generally consists of two stages i.e. (i) calculation of price indices for elementary aggregates (item level indices) and (ii) the aggregation of these elementary price indices to higher level indices using the weights associated with each level.Laspeyres formula is used for aggregation of indices. Specifications of items have been selected on the basis of popularity in the respective areas. These specifications are different in terms of units, quality etc for different price schedules. Prices relative of each product specification (current month price/base year average price) is worked out. Average of these price relatives under the respective item multiplied with 100 gives the index for that item.

Laspeyres formula; go through the below links to know this formula works.

CLICK HERE for  Laspeyres formula
Calculating a Laspeyres Index
A Laspeyres Index is known as a “base-weighted” or “fixed-weighted” index because the price increases are weighted by the quantities in the base period. 

 Let us calculate DA using Laspeyres formula for example prices of Rice and Wheat are as follows

Price of Rice in 2006 is Rs 20 per kg for 100kgs consumption
Price of Rice in 2011 is Rs 30  per kg for 100kgs consumption
Price of Rice in 2012 is Rs 40  per kg for 100kgs consumption

Price of wheat  in 2006 is Rs 15  per kg for 100kgs consumption
Price of wheat  in 2011 is Rs 25  per kg for 100kgsconsumption
Price of wheat  in 2012 is Rs 30 per kg  for 100kgs consumption

Calculate Consumer Price Index  using the  Laspeyres formula
 for 2012 year  L2012 =
{100 × 40.00} + {100 × 30.00} / {100 × 20.00} + {100 × 15.00} = 4000+3000/2000+1500 =7000/3500 =200 points 
for 2011  year L2011 =
{100 × 30.00} + {100 × 25.00} / {100 × 20.00} + {100 × 15.00} = 3000+2500/2000+1500 =5500 /3500 =157 points 

Calculate DA
Dearness Allowance = (Avg of AICPI for the past 12 months - 115.76)*100/115.76
DA ={{ (200+157)/2} -115.76)}}*100/115.76 = (178-116) *100/115.76=6200/115.76= 53% DA
Price Rise is 100 % in last six years ,where as DA is 53 %.
 Formula available for calculate CPI are
Laspeyres formula
Paasche formula
Fisher formula
Please click the link for  Consumer Price Index Numbers - Separately for Rural and Urban Areas and also Combined (Rural plus Urban)

vide http://mospi.nic.in/Mospi_New/upload/brochure_n_cpi18_feb11.pdf

The Staff Side of JCM has represented to the 5th and 6th CPC about the faulty DA formula and the DA should be paid every three months and Average of AICPI should be removed. The same demand of the Staff Side of JCM should be there now also.

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