8th Pay Commission: AIDEF seeks review of DA and DR inflation formula to better reflect living costs

The All India Defence Employees’ Federation (AIDEF) has requested the 8th Pay Commission to review and reconsider the index used to calculate Dearness Allowance (DA) and Dearness Relief (DR). They said that the current methodology used in the calculation may not reflect the actual cost of living and inflationary pressures.

Currently, the DA and DR are calculated using the 12-month average of the All India Consumer Price Index for Industrial Workers (AICPI-IW). This index serves as the benchmark for compensating central government employees and pensioners for inflation.

The primary objective of this index is to provide employees and pensioners with much-needed relief against rising expenses, day-to-day inflation and other associated factors. Still, the relatively higher weight of relatively stable expenditure categories has made it difficult for the index to adequately and fairly represent the current inflation picture.

Throwing light on this important aspect, in its second supplementary memorandum submission to the 8th Pay Commission, AIDEF categorically said that the revised CPI basket, which was introduced in the year 2022-23, does not adequately capture the changes and increases in food commodity prices and seasonal agricultural products.

The federation also clarified that, while food and beverage now account for only 36.75% of the total index, categories and aspects such as healthcare, housing, transport, communication and digital services have received greater weightage, despite generally experiencing more enduring price movements and changes.

According to the AIDEF, lower-paid employees and pensioners spend a larger share of their earnings on medicines, food, healthcare, house rent, education and other essentials. These expenses mean that their personal inflation rate could be higher than the one reflected in the revised index. Due to these factors, this index requires a complete overhaul, they say.

The federation said that pensioners generally allocate a significant portion of their income to health insurance, medical treatment, caregiving services and medicines. If these expenses rise faster than overall Consumer Price Index (CPI) inflation, periodic Dearness Relief (DR) revisions may not fully protect their purchasing power.

These expenses, they said, may result in additional inflationary pressures and difficulty managing day-to-day costs.

To address these concerns, the AIDEF has proposed creating an employee-specific cost-of-living index. This index must give due weight to changes in expenditure when determining future fitment factors and to better recognition of elderly care expenses in pay and pension revisions under the 8th Pay Commission.

For more updates, recent developments and changes related to the 8th Pay Commission, you can refer to the official website at: https://8cpc.gov.in/

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