7th Pay commission: How revised Variable Dearness Allowance will benefit scheduled workers

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In a move to increase the minimum wages of workers employed by sectors overseen by the central government, the government announced a hike in variable dearness allowance (VDA) with effect from 1st April 2021. Applicable equally on both casual and contract workers, the last VDA revision came around in October 2020. 

Union Minister for Labour and Employment Santosh Gangwar said this will benefit approximately 1.50 crore workers engaged in various scheduled employment in the central sphere across the country. “This hike in variable dearness allowance will support these workers particularly in the current pandemic times," he mentioned. 

What is Variable Dearness Allowance?

The Ministry of Labour and Employment releases a monthly index, namely CPI-IW (Consumer Price Index for Industrial workers), which forms the basis for the calculation of dearness allowances for employees who constitute the organized sector. 

This sector encompasses any corporation established by the central government, like mines, watch and ward, construction of roads, oil fields, major ports, and more. For calculating the most recent CPI-IW dearness allowance revision, the average CPI-IW for July-December 2020 was taken into count. 

The hike ranges between Rs 105-210 per month per worker. While these much-needed raises were delayed due to the pandemic, a dearness allowance hike of almost 4 percent of the basic salary of central government employees is also expected to be announced in June 2021, said Chief Labour Commissioner (Central) DPS Negi.

How is Variable Dearness Allowance calculated? 

The All-India CPI-IW Index for March 2021 was at 119.6 points, a rise from the 119.0 points as calculated in February 2021. This also implied a rise in inflation rates, from 4.48 percent in February to 5.64 percent in March. 

Commissioner Negi noted that the rise could be attributed majorly to the rise in prices of fuel, food, and beverage items like cooking gas, edible oils, tea, served and processed packaged food, amongst others. Experts noted that this hike will help cover their costs of living amidst increasing inflation.