In a development that will affect lakhs of workers across sectors in the State and amid protests from trade unions, the government has deferred payment of Variable Dearness Allowance (VDA) from the employer for a period of one year. More shocking for the workers is that while the industry had initially sought deferment for four months, the government has granted a year.
The VDA payable from April 1, 2020, to March 31, 2021, has been postponed by the government in a bid to help the industry. While the demand for exemption from payment of VDA had come from industries, the MSME Department had also recommended it and sought the opinion of the Labour Department. After holding consultations with industry representatives and trade unions in May, the Labour Department notified postponement on payment of VDA on Tuesday. The order said that the Labour Commissioner felt that in the current “emergency situation”, payment of VDA that is part of the minimum wage can be put off.
The VDA suspension is expected to hit about six million workers in 82 scheduled employments under the Minimum Wages Act. The VDA for workers is notified annually by the State government based on inflationary trends and is calculated on the basis of price rise recorded the previous year.
Accordingly, the VDA for workers in Karnataka for 2020 ranged from ₹417.6 to ₹522 per worker per month, depending on type of industry. This VDA was arrived at based on the calculation of a 348-point increase in Consumer Price Index (CPI) or cost of living index for 2019-20 payable in 2020-21. Four to five paise per day — depending on the industry — is calculated for every point increase.
The industrial units in Karnataka had sought deferment of VDA payment citing that they had already paid full wages to workers for the lockdown period, and with fresh orders not coming in, they were finding it difficult to pay wages. Meanwhile, trade unions have argued that the decision to suspend VDA would be a contempt of court as the Minimum Wages Act that encompasses VDA has been upheld by the Supreme Court.
The All-India Trade Union Congress (AITUC), which had earlier opposed a freeze on VDA, said that consumption accounts for 60% of the GDP and private sector investments account for only to 22%. “It makes economic sense to put money into the hands of the working class in order to revive the economy,” it said.
Conflict of interest?
The AITUC has also alleged that there is a “serious conflict of interest” in the posting of MSME secretary Maheshwar Rao to hold the concurrent charge of Labour Secretary. It has cited Mr. Rao’s letter as MSME Secretary recommending exempting payment of Variable Dearness Allowance in April. “While he recommended the VDA freeze, he is now holding the concurrent charge of the Labour Department, which has fulfilled the wishes of the industry,” said the AITUC.
