-44-

CHAPTER IV

DEARNESS ALLOVJANCE

Introductlon

The wage bill of both Central and State Governments

as well as of industries in public and private sectors has

recorded a steep rise in the last few years. A factor which

has contributed to this increase is the payment of dearness

allowance. The expenditure on this account has not yet grown

over the years but its revision too has become far too frequent,

resulting in posing a serious problem to both Government and

industry, particularly, as the availability of resources has

become more stringent. Two factors that have exerted consi­

derable pressure for rise in the expenditure on D.A. are :

(1) the fast pace of increase in general level of prices and

cost of living; (2) the clamour of trade Unions to maintain

and where, possible to improve the real earnings of workers.

While rise in cost of living index has led to increase in the

matching compensation, the desire on the part of trade unions

to insulate the workers from the adverse effects of price rise

has led to the development of a built in mechanism in the

wage system whereby compensation payable in the fom of

dearness allowance is linked to the cost of living index.

Whilst in the early years of its introduction, dearness

allowance, in its ;^ractlcal application had served a useful

 -45-

purpose, subsequent developments have proved it erratic, and

capricious. There is no doubt that the scheme appears un­

realistic and almost unworkable. It has completely distorted

the wage structure and imposed an ever increasing burden on

Industry on account of the system of point to point neutralisa­

tion involving month to month adjustment of. the cost of

liv in g .

Despite the grave problem posed by periodic upward

revision of D .A , previous l it t l e consensus has emerged about

the kind of improvements needed to curb the adverse features

of the dearness allowance system. The practice of paying

dearness allowance has been considered in the past by several

o ffic ia l groups and committees. The issues involved in the

payment and revision of D .A . were considered by the National

Commission on Labour (1969) and the Third Pay Commission

(1 9 7 3 ). A Committee on Wage Policy appointed by the Govern­

ment of In dia , to recommend the criteria for fixing wages in

context of F ifth Five Year Plan, under the chairmanship of

Prof. S. Chakravarty, also considered the question of D .A ,

The issues involved in the D .A , problem were also examined at

length by the representative of industry at the first and

second I .R . Conference held by the Council of Employees in

1974 and 1975 respectively. The Bhootalingam Committee

appointed by the Government also considered the payment of

D .A . but its recommendations were neither accepted by labour

nor employers. Despite t h is , close consideration, the

 -46-

problem of D .A , has not found any satisfactory solution as

yet.

Development and Problem of D ,A , In India :

The practice of payment of D .A . is a relatively recent

development. Although its origin may be traced to payment of

compensation made by Millowners in Bombay and Ahmedabad, during

the F ir s t World War, the payment of D .A , gained importance

during Second World War. Faced by sharp rise in prices and

cost of liv in g , the industrial undertakings in the textile

and engineering industries resorted to practice of paying

additional allowance instead of revising wages to compensate

for the rise in the cost of liv in g . The payment of additional

allowance was done in the b e lief that the inflation of prices

and cost of living was a temporary phase and that once normalcy

was restored, the need for payment would be obviated. However,

this be lief fa ile d to m aterialise. As the Government resorted

to cheap moving policy and deficit financing in furtherness of

defence preparations, the inflationary price rise became more

pronounced which in turn lead to wide spread clamour for

compensation to neutralise the rise in the cost of liv in g .

Another factor contributing to extension of D ,A . during

the war period was the awards given by the Industrial Courts

for paying D .A . or dear food allowance to mitigate h a r ^ h ip s

being experienced by the workers and also to maintain

industrial peace for uninterrupted working of the war

 -47-

industries. In industrial jurisprudence principle of paying

D .A . became firmly established by the end of Second World War.

A fter Independence, the practice of payment of D .A ,

became and important element of the wage system in organised

■sector of industry.

The Minimum Wages Act, 1948 providing for fixation of

minimum wage defined the rate of minimum wage to consist of

(a) basic rate of wage and cost of living allowance, (b) a

basic rate of wage with or without cost of liv in g allowance

and cash value of concessions in respect of essential commo­

d itie s , supplied at concessional rates, or (c) a ll inclusive

rate. This act thus extended the practice of payment of wages

linked to cost of living index to the employments in unorga­

nised sector.

Nature of Problems ;

The system of dearness allowance is only a device

designed to adjust wages to changes in cost of liv in g . The

rise in D .A , is in this sense, only a reflection of the rise

in prices. The solution to the problem of rising D ,A . thus

lies in maintaining the price stability through restoration

of the supply and demand equilibrium.

When D .A . is paid to large sections of employees, it

becomes a potential source of cost-push inflation as such

payments in given circumstances tend to raise the wage costs

 -48-

both in relative and absolute terns, which in turn contribute

to vage-price spiral. Further, such payments by placing

additional purchasing power in the hands of employees, widen

the gap between demand for and supply of basic goods of

consumption which accentrates the rise in prices. Realising

th is, Government of India promulgated an Ordinance called

the '’Additional Emoluments (Compulsory Deposit) Ordinance*

in July 6 , 1974, with a view to immobilising the additional

wages and 50^ of the D .A . by impounding them for a specific

period. 3y another order called as the Compulsory Deposit

jcherae (Income-tax Payers) Ordinance 1974, Government has

sought to Impound a ^Jo to 259^ of pay or incomes of salaried

and the other professional individuals in the form of compul­

sory deposit. Refund of these amounts are deferred by

subsequent orders, Issued from time to time. Government

was expected to save Rs, 500 crores by the first Ordinance

and Es. 660 crores by the sefcond one.

The system of D .A . has certain features whose effects

cannot be considered altogether wholesome on the growth and

stability of the industry. Amongst them two most important

effects are :

a) the automaticity of payment of D .A . being

linked to consumer index, and

b) lack of relationship with either the productivity

or paying capacity of the industry or service
in question.
 -49-

These features have posed serious problems to

Industries, particularly to those which are subject to price

controls. Automaticity of D .A . has placed a strain on the

liq u id resources of undertakings as this payment is not

related to their income or earning capacity. It has only

restricted the ab ility of the management to plan ahead since

the expenditure on D .A . is ever rising beyond their control.

The problem of D .A . is thus not only economic but also

technical in view of the adverse effects of system from

particiilar methodology adopted for computation and payment.

Principles underlying fixation of D .A .

The practice of paying D .A , has evolved by tria l and

error method, as a response to meet the needs of industry and

labour to compensate the rise in prices. Its critical develop­

ment was not influenced by any foreign experience either, as

the same was not available. The practice of paying D .A . as

has emerged in Indian industry is unique in the world. In

the absence of any guidelines experimentation became its

chief hallmark in the in it ia l years. This has had the effect

of making the system both chaotic and heterogenous. Recogni­

sing the heterogeneity having adverse effect on wage system,

atteapts were made during the Second World War to rationalise

the system. Question of framing principles to streamline

the D .A . system was fir st considered at the F if t h Session

of the Indian Labour Conference held at T^ew Delhi in

 -50-

September 1943. The weight of opinion favouring the fixation

of allowance on a regional basis with reference to cost of

liv in g , separate rate to be applied to separate industries

and that the degree of assistance should decrease as the wage

rate increased.

Following the above, the Government of India appointed

a Committee - Gregory Committee - which submitted its report

in 1944, making the following recommendations ;

(1) The payment of D .A . should be lim ited to

income level below Rs. 200/- p.m.

(2) The amount of D .A . should be fixed in terms

of rupees and not as a percentage of actual
income. In view of difference of opinion,
it suggested two alternatives :

a) either to equate the absolute amount of

D .A . to fu ll compensation for the weighted
average of the earnings of a ll wage groups
below Rs. 200/-; or

b) to equate the same to f\ill compensation

for the weighted average earnings, of all
wage groups below the weighted average as
calculated in ( a ) .

(3) The payment of additional D .A . should be

determined in relation to the cost of
living Index.

(4) There should be single D .A . in each region

to which the workers in that region should
be entitled.

(5) The degree of assistance should diminish as

wages increased above subsistence lev el.

(6) The payment of D .A . should be made in such a

way that it would raise the allowance below
the prescribed standard.
 -51-

(7) There should not be any automatic increase in

D .A . with every small change in the index.

(8) There should be only one flat rate of D .A .

for all workers.

The Committee also favoured the cash element of

allowances should be fixed at a minimum and the bulk of the

allowance be made available in kind through supplies of

essential articles at concessional rates,

Gregory Committee report was considered by the

Tripartite Standing Labour Committee at Lucknow in January

1944 which recommended to Government to take a decision. But

the Government did not take any decision. So the report

served as only an effort of its kind to put the system of D .A ,

on a more rational basis in the post war period. Subsequent

discussion about D .A . did not concern so much about prescrip­

tion of general principles for paying D .A , but with the merger

of portion of D .A , in the basic wage. The Indian Labour

Conference held in August 1951 and F ift h Session of Standing

Labour Committee held in April 1956 did not suggest any

specific principle or solution. The Planning Commission

(with late Shri N .V . Gadgil as Chairman) in its F irst Five

Year Plan commended to private sector industries the recommen­

dation of Dearness Allovmnce Committee to merge in pay about

bOfo of D .A . then admissible to the Central Qovernment

employees drawing a basic pay upto te. 750/-. Though attempts

were made to evolve general p rinciples, it was the legal

 -52-

award given by the F irst Labour Appellate Tribunal and later

by the Supreme Court which led to formulation of the body of

principles governing the payment ( D . A . )•

Ceiling on D .A . and Supreme Court on the issue :

The question of imposing a ceiling on D .A , was

considered in detail by Supreme Court in the appeal against

the award of the Industrial Tribunal, Maharashtra, in 1975

(M /s. K illic k Nixon Ltd. Ys K illic k & A llie d Companies

Employees U nion). The court decided that inspite of the

financial capacity of the companies to pay D .A . as against the

view held by the Tribunal that there should be no ceiling in

D .A . Financial capacity of the company alone is not the

criterial and even if the Company is prosperous, ceiling in

D .A . could be fixed particularly in higher lev els. The

complete neutralisation of rise of the cost of living could

not be allowed except to the lowest categories of employees.

Imposition of ceiling D .A . was not an absolutely alien

phenomenon in India. Ceiling was not rejected out of hand as

’’ irrational or unjust” by various unions in course of collec­

tive bargaining. The court further held that in cases of

lowest paid workers - pay of Rs. 100 - D .A . should be compen­

sated fu lly but not less than 955^. In other cases the

tapering system may be adopted. It also gave 14 guiding

factors for determination of D .A . by Industrial Courts.

They are :
 -53-

(1) Condition of the vage scale prevalent in the

Company;

(2) Condition of the wage level prevalent in the

industry and region;

(3) The wage packet as a whole of each earner in

the Company with all amenities and benefits
and its ability and potency to cope with the
economic requirements of daily existence
consistent with his status in society,
responsibilities, efficiency at work and
industrial peace;

(4) The position of the company viewed in relation

to other comparable concerns in the industry
and the region;

(5) Preceptive necessity for full neutralisation

of cost of living at the rock bottom of wage
scale if at or .just above the subsistence
level,

(6) The rate of neutralisation which is being

given to employees in each salary slab;

(7) Avoidance of huge distortion of wage

differentials taking into reckoning all
persons employed in the concern;

(8) Degree of sacrifice necessary even on the

part of workers in general interest;

(9) The compulsive necessity of securing social

and distributive justice to the workmen;

(10) Capacity of the Company to bear additional

burden;

(11) Interest of national economy;

(12) Repurcussions on the other industries and

society as a whole.

(13) The state of the consumer price index at the

time of decision;

(14) Forebodings and possibilities in the

foreseeable future as far as can be envisaged.
 -54-

The Court in its conclusion, however, observed as

follows :

We do not wish to lay down as an invariable rule

that in all cases there should be a ceiling on D.A. V/henever

a case of this nature comes for industrial adjudication, it

will always be a«delicate task for the Tribunal to strike a

balance keeping in view of the above principles, weightage of

each one of which being variable according to conditions

obtaining. Whether or not there shoiild be a ceiling on D.A.

in a given case must depend on the facts and circumstances

of that case. There can be no inexorable rule in that respect.

We have formulated the various principles which must be taken

into account by the Tribunal in determining this question

but most dominant of these must always be that of social

justice, for that is the ideal which we have resolved to

achieve when we framed our constitution, ”

It is clear that the above principles of the highest

judiciary has left the question of granting the quantum of

D.A. to equivity and good conscience of, the Industrial

Tribunals/Courts. But no definite formula has been enunciated

for maintaining uniformity for payment of D.A. even in the

region. It can, therefore, be said that on such an important

matter like D .A ., no scientific formula has been evolved but

detemined on the arbitrary conclusions of the judges based

on the judge made laws of Region-cum-Industry, capacity of

 -55-

the undertaking to pay, social justice, cost of living thereby-

leaving the fate to the ability of the parties in presenting

their cases. This has resulted in creating differential wages

in the same or similar industries. The judgements of the

Supreme Court on appeals in individual cases had its own

weight on the minds of the judiciary. The plea held is that

while deciding a pragmatic approach rather than academic or

doctrinnaire approach should not be done.

Supreme Court on D.A.

It is a well recognised principle that D.A. could be

awarded in cases where the scale of pay falls short of living

wage and where the industry has capacity to pay. When the

nature and quantity of work by women and boys is not different

from that done by other workmen, they should receive the same

amount of D.A. It would be unreasonable to allow one scale

of D.A. to the daily rated workmen and another to the monthly

rated workmen in the same company. The cost of living of

clerical staff is higher than that of factory workers is well

recognised. Factory workers are not entitled to claim the

allowance on a percentage basis as in the case of clerks. As

the remuneration is generally fixed on the basis of three

adult consumption basis, the fact that workman himself only

gets free food is no ground for refusing D.A. but deduction

should be made for free food supplied to him. In fixing

D.A. in any industry the D.A. prevailing in other industry

 -56-

in the same area can "be taken into consideration. While

determining revision of rate of D.A* it is incumbent on

Tribunal to compare total emoluments for ascertaining whether

the concern in question is paying a satisfactory D.A, The

extent of rise in cost of living, the financial capacity of

the industry, the time when the D,A, was last fixed is to be

considered. In deciding question as to what concern or

company may be treated as comparable for the purpose of D.A.

regard must be had to the extent of business carried on, the

extent of profits made, the nature of business, the standing

of the Company, strength of labour force, and character of

wage structure. D.A. must be on a sliding scale. The rate

of minimm wages statutorily fixed in the same area or lower

rate of wage paid under agreement in previous years are not

relevant considerations. Technical considerations of re-

adjudication should not be allowed to hamper the discretion

of the Tribunal and workmens demand cannot be rejected on the

ground that enough time has not passed after the last award.

D.A. should not be granted on basis of cent percent neutralisa­

tion. A workman has to bear like any other citizen to some

extent the burden of the increased cost of living. D.A. to

the extent of neutralisation over 100 per cent is too high.

Most dependable method of calculating D.A. was to link it

to the cost of living index. Where such figures were not

available it is undesirable to link with indices of other

places. In such cases flat rate should be fixed. D.A. is

 -57-

not to be determined on the percentage of basic pay since

D.A. would vary from workman to workmen. The theory t^hat an

institution which cannot pay for the minimum requirements of

a workman has no right to exist cannot be unqualifiedly

applied to a charitable institution and the amount of D.A. of

charitable institution falls in line with non-profit making

concern. Where the financial position of a concern was not

so sound, D.A. was awarded at 1/3 rate of textile mill is

justifiable. Higher the rate of D.A. could not be paid out

of the profit of last year if the concern is in loss during

the year.

The Tribunal can fix suitable date other than the

date of reference for payment of D.A. Capacity of the

Company is a relevant factor for revision of D.A. but another

factor is to be considered whether it could effect economy by

reducing the wage bill of highly paid officers. Time has now

come when employees getting same wages shoiild get the same

D.A. irrespective of whether they are clerical or factory

workmen. Tips received by hotel and restaurant employee are

not to be treated as substantial amount made by or on behalf

of the employers. It would not be unfair or \an;3ust to

recover from D.A. in case of waiters who received food or

tea and accommodation from their employers. Increase in the

cost of living index over a course of nine years would be a

change of circumstances justifying an upward revision of

 -58-

wages. v>fhile dealing with the principle of claim by employer

for the reduction of the wage structure, GaJendragadkar C.J.

observed, that "... if it appears that the employer cannot

really bear the burden of the increasing wage b ill, industrial

adjudication on principle, cannot refiise to examine the

employers case and should not hesitate to give him relief if

it is satisfied that if such a relief is not given the employer

may have to close down his business. It is unlikely that such

a situation would frequently arise, but on principle, if such

situations arise, a claim by the employer for the reduction

of the wage structure cannot be rejected summarily," A

fortiori, there can be reduction in the rates of dearness

allowance as well where the circumstances warrant. But where

circumstances do not warrant such reduction, the reduction is

unjustified. In the rates of D.A. to a workman employed in a

weaving mill at Sangli, were linked with the D.A. payable at

Sholapur subject to a certain deduction, as there was no cost

of living index available at Sangli. But later, as there was

depression in business of one mill at Sholapur the rate of

D.A. was reduced. Subsequently the other mills also effected

reduction. Consequently the mill at Sangli also introduced

reduction. Since the reduction of D.A. in Sangli was not due

to the depression of business, the Supreme Court upheld the

decision of the award of the Tribunal as the reduction of

D.A. in Sangli as unjustified.

 -59-

Cost of Living Index and Consumer Price Index ;

In India a standardised type of family-living study

was first initiated in Bombay in 1921. Such inquiries were

also conducted in some centres in Bihar in 1923, in Sholapur

in 1925 and in Ahmedabad in 1926. While reviewing the position

of social survey in India, the Royal Commission on Labour

pointed out the great paucity of statistical material in this

country for judging the standard of living of the workers and

recommended conduct of socio-economic enquiries of the type of

family living surveys. This report naturally gave an impetus

to the conduct of family budget inquiries. In all the surveys

that followed, sampling and interviewing techniques were

adopted; though, of course, not of a such advanced nature.

The statistical analysis of the data collected was also

attempted. During the Second World War, the Government of

India appointed the Rau Court of Enquiry, constituted the

Trade Disputes Act, 1929. The Commission, inter alia,

recommended that the Central Government take up responsibility

for maintaining up-to-date cost of living index numbers for

important areas and centres. The Government accepted this

recommendation and set up a special organization called ’’the

Directorate of Cost of Living Index Numbers” and family budget

inquiries amongst industrial v;orkers were conducted at 28

centres during 1944-45 in the course of which 2700 budgets

were collected, A significant feature of these inquiries was

that for the first time in this country an attempt was made
 -60-

to conduct such inquiries; simultaneously at a large number of

centres under more or less uniform techniques. During the

same period, the Labour Bureau of the Government of India and

some of the organisations of the State Governments continued

to conduct family budget inquiries from time to time at speci­

fic areas either for deriving weighing diagrams for consumer

price index numbers or collection of data required for

fixation of minimum wages. In the background of these events

the Second Five Year Plan made the following note-worthy

recommendations ;

H The existing wage structure in the country

compromises, in the main, a basic wage, and a dearness

allowance. The later component in a majority of cases has

relation to cost of living indices of different industrial

centres. These indices have not been built up on a uniform

basis, some of them are worked out on primary data collected

about 20-25 years ago and are therefore of no true reflection

on the present spending habits of workers. Since one of the

questions which the Wage Commission has to take into account

is the demand made by the workers’ organisations for merging

a part of the D.A, with the basic wages, evolving recommenda­

tions for such a merger will not be sufficiently scientific

if cost of living indices at different centres do not have

uniform basic. Steps will, therefore, have to be taken

simultaneously with the undertaking of a wage census, to

 -61-

institute wage enquiries for the revision of the present

series of cost of living indices at different centres;

Pursuant to the above recommendation, in the Second

Five Year Plan the Labour Bureau, Ministry of Labour and

Employment, Government of India conducted the family living

survey in 1958-59, The survey based on co-operation of

several institutions and its technical details were worked out

under the guidance of Technical Advisory Committee on cost of

living index numbers consisting of the representatives of the

Ministry of Labour & Employment, Food & Agriculture, Finance,

Planning Commission, the National Sample Survey Directorate,

the Department of Statistics (C .S .D .)» Indian Statistical

Institute and the Reserve Bank of India. The field work was

entrusted to the Directorate of National Sample Survey, and

processing and tabulation of data collected in Sch. A (family-

budget) to Indian Statistical Institute, Calcutta, The

tabulation of data collected in Sch, B which dealt with the

level of living was done in Labour Bureau. It was a multi­

purpose survey, and so the investigation conducted under it

covered both the family and the level of living. Ultimate

analysis of the data, publication of two reports on the

results of the survey and construction and maintenance of the

new series of consumer price index numbers were the respon­

sibilities of the Labour Bureau. The first thing the

organization did was to define ’’working class family” , which

 -62-

was the basic UQit of the survey. It was defined in terms of

sociological and economical considerations consisting of

persons : (1) generally related by blood and marriage or

adoption; (ii) usually living together and/or served from

the same kitchen, and (iii) pooling a major part of their

income and/or depending and common pool of income for a major

part of their expenditure. The geographical area to be

covered by the survey was decided in consultation with the

local organisations both official and non-official. The

following observation of the survey is significant :

” The Consumer Price Index measures nothing but

change in prices as they affect a particular popiilation group

and so it is really a price index number as distinct from

cost of living index number. In fact, these indices used to

be termed as cost of living index number in the past, but in

order to make the meaning clear, it was decided by the

Government to change the name to consumer price index number

in accordance with the international recommendations and

growing practice in other countries. Most of the State

Governments compiling such index numbers have also adopted

this usage. "

In Ahmedabad Millowners Association Vs Textile

Labour Association, the Industrial Court found that survey

conducted under the advice and guidance of a Technical

Advisory Committee was of a high order and that the work of

 -63-

carrying on the survey was scrupulously followed in the

recommendations made by the international Labour Office and

the United Nations. The Industrial Court was of opinion that

the compilation of Consumer Price Index by Labour Bureau,

Simla was proper and was not unscientific. In appeal the

observations of Gajendragadkar C.J. in connection with the

cost of living index are note-worthy :

" This index number is intended to show over a period

of time the average percentage change in the prices paid by

the consumers belonging to the population group proposed to

be covered by the index for a fixed list of goods and services

consumed by them. The average percentage change, measured by

the index, is calculated month after month with reference to

a fixed month with reference to a fixed period. This fixed

period is knovm as the "base period" of the index and since

the object of the index is to measure the effect of price-

changes only, the price-changes have to be determined with

reference to a fixed list of goods and services of consumption

v^hich is known as a fixed ’’basket" of goods and services, "

The index does not purport to measure the absolute

level of prices but only the average percentage change of

prices of a fixed basket of goods and services at different

periods of time. Amongst the various preliminary considera­

tions in the construction of price index numbers, first

consideration is the purpose which the index is Intended to

 -64-

service, and that necessarily involves the definition of the

group of consumers, to which the index is intended to relate,

then it is necessary to determine the consiffliption level and

pattern of population group at a period of time which generally

becomes the wage period of the index numbers; For that

purpose, a list of commodities and services has to be made.

The list woiild contain items of food, fuel and light, clothing

and others; items of services such as barber charges, bus

fare, doctor's fee etc, have also to be selected. The combined

total of the items of commodities and services that constitutes

the basket* Then comes the quality for which the quality

which is popularly consumed is selected. The importance or

weight which has to be attached to each commodity or service

is also a material factor.

Thus the cost of living index and consumer price

index has grown and gained importance in wage including D.A.

determination.

Pattern of D.A.- in Poona Industries :

An analysis of the D.A. pattern of 2V industries in

Poona was carried out with the background ideas of various

patterns prevailing in India, It reveals, the realisation

of the local industries that payment of D.A. has become a

permanent feature and wage adjustment has to be made by

paying portion of wages in the form of D.A. Out of 27

industries undertaken for study all the industries have been

paying D.A. in one form or the other.

 -65-

liOO Prior to 1064 till particulars about Poona Cost of

Living Index was made available, 14 industries were paying

D.A. linked to Sholapur Cost of Living Index* 3 industries

had linked to Bombay cost of Living Index and 5 industries at

slab rate basis and 4 industries were paying consolidated

wages and one was paying at Central Government rate. The

Supreme Court had held that the linking with the living index

of other regions was not correct. But as there was no system

of compiling a separate index number for Poona, Poona

industries had no alternative except to compare with the

living index of adjoining areas like Bombay and Sholapur.

The first case that came for consideration of the

Tribunal for linking to Poona index was that of Hindustan

Antibiotics, In 1962 the charter of demands submitted by

their Union was referred to Ad;]udication. While determining

the wages including D . A . , it was argued before the Tribunal

that the Government of Maharashtra was compiling Poona Cost

of Price Index and D.A. should be linked to point to point of

P .C .P .I . As the figures were not available from Government,

the Tribunal gave its Part I Award dated 7-11-1963 and

directed the parties to come back for final adjudication

about D.A. when the figure about Poona living index are made

available by the Government of Maharashtra.

Against this Part I Award the company and the Union

had appealed to Supreme Court which before commencing its

 -66-

hearing dlrectGd the Industrial Tribunal to dispose of the

award about payment of D.A. The Tribunal, on considering the

total wages paid by the neighbouring industries, gave its

Part II award dated 26-11-1964 giving linkage to Poona Cost

of Price Index.

The Tribunal observed as under :

For variation (rise or fall) of every 5 points in

the P .C .P .I . over the base of 1960, there should be a variation

of Rs, 3,50 per month in the D.A. for employees drawing a

basic wage/salary upto Rs. 75,

Illustration : The D.A. at index 100-104 would be as

those awarded in the Part I Award dated 7-11-1963. At the

index number 105-109 the rate will be Es. 3,50. At the index

No. 110-114 the total rise would be Rs. 7/- and so on. For

employees basic wage/salary above Rs. 75, the variation will

be instead of Rs. 3.50 as follows ;

Rs. 76-112 - Fi. 4

Es. 113-150 - Rs. 5

Rs. 151-200 - Es. 6

Rs. 201 and above - Rs. 7

The above shows that the Tribunal has rejected the

plea of the Union for point to point fixation but had agreed

for a rise or fall over 5 points.

 -67-

This raay be perhaps due to the general view held by

the Supreme Court that fixation at point to point is not

feasible and there would be needless work of calculation.

For the second time the question of linkage of D.A,

to P .C .P .I . came before the Industrial Tribunal in 1974 for

adjudication, in the case of Ruston & Hornsby Ltd, This

company had entered into an agreement dated 29-9-1970 agreeing

to pay D.A. at the rate of 5 paise per point of P .C .P .I . (base

1961) over the first 25 points e.g., on 1-5---1969 when P .C .P .I .

was 159, D.A. payable would be (159-25) x 5 p = Rs, 6.70. Then

the further demands made by workmen was referred for adjudica­

tion vide ref. IT No. 50 of 1974. In its award, the Tribunal

approved the Settlement arrived by the parties agreeing to

pay D.A. at 5 paise per point P .C .P .I . over all the points.

When the P .C .P .I . numbers were published the 20

industries in Poona adopted linkage to P .C .P .I . at the rates

of 5 paise per point. Out of 27 industries, one industry

adopted P .C .P .I . by an award dated 26-12-1964, two companies

by the consent awards submitted to the Tribunal after arriving

a settlement and the remaining industries adopted by

collective bargaining.

1.01 There is only one industry out of 27, which pays

variation dearness allowance linking to P .C .P .I . for employees

at Poona and linking Bombay index to employees working in

 -68-

Bombay and Delhi index to employees at Delhi. It would be

convenient to meet the requirements of employees working

outside Poona.

1.02 It is observed that except in two industries, which

are paying slab rate of D.A. to workmen drawing basic pay of

Rs, 600 and 1019, the other industries are restricting the slab

to persons drawing Rs, 300 and Es. 400 only. It was interesting

to note that only one industry out of 27 is made an attempt

for ceiling payment variation D.A., to Es, 570. This ceiling

is in conformity of the view of the Supreme Court that ceiling

is neither unjustified nor unfair. Discussions with the

Managements representatives reveal their failures to come to

any agreements with the Unions,

1.03 Though the linkage to P .O .P .I. has been established

at 1960-100 base. One industry however linked at 5 paise per

point per day from 1-6-1976 to 31-5-1978 after deductions of

5 points. From 1-6-1976 to 31-5-1978, after deductions of

5 points, from 1-6-1978 till the period of the settlement on

31-5-1980 for all points over 100 P .O .P .I. This is said to

the restrain payment of D.A. and give a better hope to workers

till the operation of the settlement, arrived out of collective

bargaining. This minor variation will only mean slight

superiority of the management and adaptability of the Union

during negotiations.
 -69-

1,04 The P .C .P .I . being available, it is but naturally

expected that the neutralisation point is adopted at 100 as

base. But it is observed that this base is changed in the

industries as given below :

Base 100' No. of Industries

1. 100 4
2. 127 3
3, 129 1
4, 160 1
5, 258 1
6, 244 1
7, 200 4
8, 194 1
9, 265 1
10, 280 1
11, 210 2
12, 95 1
13, 276 1
14, 75 1
15. 250 1
16. 78 1

The possible reason for such a change is while

detemining the total wages, it is necessary to consider the

prevailing wages in the neighbouring Industries, profitability

of the concern and the wages settled for payment during the

course of negotiations and the point at which the bargaining

has been concluded. The amount so agreed is being paid by

way of additional D.A. or F.D.A. as evidenced by 4 industries.

This will have the advantage of paying more D.A, to persons

drawing more on the basic pay and may avoid unnecessary

fattening of the wage scale. There will be additional

 -70-

advantage of directly calculating variation D.A^ depending

upon the cost of living index,

1.05 In 2 industries it is noticed that D,A. is paid on

percentage basis on the basic pay. One industry pays the D.A,

on percentage basis to higher categories, over and above the

quarterly average point to point basis e.g. D-1 grade neutra­

lisation is at 100 points. D-2 grade is given XOPfo more than

D-1 grade and D-3 to 6 55^ more than the preceding grade. In

one of the two companies mentioned above FDA and DA are given

on percentage basis.

The highest court of judiciary had held a view that

payment of D.A. on percentage basis on basic pay is not

desirable as this would amount to only paying more to persons

drawing higher basic pay. It appears that the purpose of

making adjustment of the negotiated wages, this has become

inescapable to them for avoiding high increase in the pay

scale,

1.06 The rate of increase of D.A. on point to point basis

has been fixed at 5 paise per point by the Tribunal. One

industry after paying at 5 paise per point upto 250 P .O .P .I .,

had agreed to pay at 6 paise per point per day over 250

points. This sudden change which is not prevailing in any

other industry is not understandable. The other Unions in

due course of time may demand similar changes and it may

 -71-

become a cause for a conflict for wage negotiations. Further

this Unit which has hitherto been vrorking without the existence

of a Union, may be under the mistaken idea that the workers

can be kept self contended. But the idea of running the

industry without allowing formation of a trade union may not

perhaps last long as can be seen from some of the activities

of workers in that unit,

1*07 In regard to rate of D.A. per point, there is only

one organisation wherein after paying Es, 8.30 at 276 P .C .P .I .

payment for rise or fall over 276 points 3 paise per point

per day is paid. This is perhaps the industry which is yet

to establish itself a major industry along with its promoter

industry. One industry pays at the rate of 4 paise above

180 points,

1.07 One industry in Poona having its registered office

and factory at Poona and another industry having its head

office in Bombay but having factory in Poona have made special

provision for payment of additional D.A. for employees

working in their branch offices at Delhi, Bombay, etc. This

is perhaps to meet the high cost of living and to avoid

separate wage negotiations for small offices situated outside

Poona. This seems to be only to meet the conveniences.

1.08 Scrutiny of the rise in P .C .P .I . given below shows

that there has been a sharp rise during 1973, 1974, 1975
 -72-

{
md 1979 and the trend of increase is still alarming. This

may upset the entire planning towards wedges in industries.

(Base 1960 = 100)

On January ' P .C .Pil. Rise or Fall Over base

1. 1969 159 -1 59
2, 1970 165 6 65
3, 1971 174 9 74
4, 1972 181 7 81
5» 1973 200 19 100
6. 1974 250 50 150
7. 1975 296 46 196
8, 1976 288 -8 188
9, 1977 293 5 193
10, 1978 304 11 204
11. 1979 314 10 214
12, 1980 347 33 249

v;ith steady increase in P ,C .P ,I . ; the demands

payment of more D.A. are bound to increase. This will put a

heavy financial burden and units having less margin of profits

will have to face financial crisis. One industry which is

already running under loss and its price being controlled by

Government will face difficulties even for survival, 2

industries who are having just marginal profits may find

difficult on account of competitors who are manufacturing

similar products in the north.

2,00 It is observed that during the period from 1969 to

2979 the pattern of D.A. has been arrived at by settlements

through collective bargaining in 26 industries except in

 -73-

three cases wherein after referring to adjudication the

I

consent award was given by the fribunal in 1974 and 1978

respectively.

2.01 In 15 industries the rate of payment of D.A. to daily

rated and time scale employees vary. It is not understandable

as to why there should be a difference in pay for workers

doing the same type of work whether on daily rated payment or

monthly rated. This type of discrimination of denying equal

payment for equal work.

2.02 It is noticed in 7 industries the rate of payment to

clerical staff is more than the rate payable to factory

workers. The Supreme Court had held that time has come to

discontinue this tjrpe of discrimination since the workers are

also required to spend for education of their children. It

is perhaps necessary to remove the discrepancies and make

payment of equal D.A. for persons drawing equal basic pay.

A statement showing the prevailing rate of payment

of Dearness Allowance is given in Annexure I I I .