People's Democracy

Unilateral Move To Launch New Price Index Series

W R Varada Rajan

THE Labour Bureau of Shimla is entrusted the task of compiling and publishing the Consumer Price Index for industrial workers. Presently the Index is published with the base year 1982=100. The Regional Computer Centre (RCC) of Labour Bureau, based at Chandigarh, carries out the work of tabulation of the prices for compiling the index. This index is being used mostly for calculation of the dearness allowance for the workers in the organised sector, where the payment is linked to cost of living index. The 1982 series has also a linking factor to the 1960 series. With this linking factor the 1982 index figures can be converted to the 1960 index figures and used for calculation of dearness allowance, where such payment is based on 1960 series. 

The Labour Bureau has now embarked on launching a new series of price index with the base year 2001=100. The new series is ready for launch. The minister of labour decided that before the launch of the new series, a tripartite index users’ meeting be convened. Accordingly a tripartite meeting was held in May this year at Shimla.

A note on the methodology for compilation of price index on base 2001=100 was placed for discussion at the tripartite meeting. The Technical Advisory Committee on Statistics of Prices and Cost of Living (TAC) has, reportedly, approved this discussion note.

ARBITRARY MOVES

This exercise for updating the base year was actually initiated during 1987, with the aim of launching a new series with 1991-92 as base year. The International Labour Organisation has recommended updating the base year for price index compilation every five years. In any case, the Family Income and Expenditure Surveys need be conducted at intervals of not more than 10 years. The TAC remitted the scheme proposed by the Labour Bureau in 1987 for updating the series to be examined by a Working Group constituted for the purpose. This resulted in an inordinate administrative delay, because of which the actual work could be started only in 1997. Based on the recommendations of the Working Group, issues like coverage of workers, selection of centres, reference period, fixation of sample size etc. were decided by the TAC. The TAC entrusted the fieldwork for conducting the income and expenditure survey to the National Sample Survey Organisation (NSSO). The survey was conducted in 78 centres between September 1999 and August 2000. The TAC considered the data collected by the NSSO and tabulated by the RCC in August 2001. The Labour Bureau since then started compiling the new series of index using the prices pertaining to the calendar year 2001. Labour Bureau claims that with this entire backdrop, the index with new base (2001=100) is ready for release.

Labour Bureau is the only institution under the ministry of labour, which has consistently been kept outside the ambit of any tripartite consultation and dialogue process. The TAC has been exercising arbitrary powers in deciding all matters connected with the methodology and compilation of consumer price index.

The updating of the series of consumer price index is supposed to be based on latest consumption pattern of working class population. There are, no doubt, changes in the consumption pattern of working class families. But, the family income and expenditure survey, which is expected to mirror the change in consumption pattern, has been conducted in an arbitrary manner. After this survey, the Labour Bureau decides on a `fixed basket’ (of consumption) and collects price data only in respect of articles/items of consumption contained in the `fixed basket’. These items of consumption are divided into six consumption groups like food, fuel, housing, clothing, etc. and further sub-divided into sub-groups. Each group/sub-group is accorded a weightage in deciding the ‘fixed (consumption) basket’. The price data is collected in different centres spread all over the country. Each centre is accorded specified weightage, related to the size of working population, for the purpose of arriving at an all India average. The Labour Bureau and the TAC claim that the new series has addressed all the deficiencies noted in connection with the present 1982 series.

The working people and the trade union movement have been expressing apprehensions over the procedure followed by Labour Bureau in compilation of price index. The common perception is that the index figures released by the Labour Bureau fail to correctly reflect the inflation or price rise at the ground level.

In 1977, the government of India constituted an Index Review Committee, known as Rath committee. It considered the Labour Bureau proposal for launch of a new series with 1971 as base year. Rath Committee report recommended, inter alia, constitution of a tripartite standing advisory committee at the all India level, as also at the state level.

The government of India chose not to implement the recommendations of the Rath Committee. It also abandoned the then move to release a new series with base year 1971. Later, the government went in for the 1982 series and appointed yet another committee (Seal Committee) and got the 1982 series cleared for release. While the Rath Committee had representation from the trade unions, the Seal Committee comprised merely experts and officials. The government, however, accepted the Seal Committee report, though several of its recommendations remained unimplemented.

UNANIMOUS OPPOSITON

When the Labour Bureau took up the exercise of conducting a family income and expenditure survey in 1998-99, with a view to launch the new series, the central trade unions protested against lack of prior consultations. The AITUC, BMS, CITU, HMS, and INTUC jointly addressed a letter to the then labour minister (M P Veerendra Kumar) urging: “There is a need to review several maladies which have occurred in the collection of price data and compilation of index without properly correcting the 1981-82 series, the introduction of the new series is likely to depress the index. It will also affect the conversion factor of the new series with the old series.”

The government of India paid no heed to the plea of the major central trade unions and proceeded with its unilateral move.

It is in this backdrop that all the representatives of the central trade unions, during the tripartite meeting in May 2005, opposed the release of the 2001 series of price index.

In a joint letter handed over to the secretary, Labour & Employment, at the meeting they said:

“We are in agreement with the objective, outlined by the Labour Bureau, of updating the existing series of the Consumer Price Index (1982=100) and to bring out a new series with a more recent base year.

“We, however, wish to point out that such a tripartite exercise involving representatives of employees, employers and State/Central governments ought to have taken place at the starting point itself. In fact, the Central Trade Union organisations had, during 1998-99, urged successive labour ministers to hold discussions on the entire question of conducting the Family Income and Expenditure Survey to avoid any unilateral steps by the Labour Bureau. Unfortunately, there was no response. Naturally, we feel that the present tripartite meeting convened at the culminating point of release of the new Consumer Price Index, making it a fait accompli, is not in keeping with the ethos of tripartism.

“Moreover, the Central Trade Union Organisations have jointly represented to the union minister of labour & employment, immediately after the present UPA government assumed office at the centre, requesting inter-alia, appointment of a review committee to go into the question of compilation of consumer price index.

“In this connection, we recall the recommendation of the committee on Consumer Price Index Numbers (Rath Committee) in its report of 1978 that at all India level a `Standing Committee consisting of representatives of trade unions and organisations of employers, the chairman of TAC and the Director, Labour Bureau should be constituted in the ministry of labour.’ This was envisaged as a continuing forum for consultations on matters relating to the index. There was also a similar recommendation for constitution of state level tripartite standing committees for periodical scrutiny of the price data and examine other related issues.

“Besides, there have been occasions in the past, where certain deficiencies in the process of compilation of consumer price indices had been pointed out by several quarters.

“We are, therefore, of the firm view that all substantive issues connected with the updating of the consumer price index, such as selection of the base year, conduct of family income and expenditure surveys, methodology of index compilation, selection of centres, methods of sampling, agencies for carrying out the necessary surveys, process of price collection and compilation et al, should thoroughly be deliberated in a tripartite forum de novo.

“We urge the ministry of labour to initiate early tripartite consultations to address the concerns raised herein above for taking positive steps in this regard.

“In view of the above, we express our opposition to the release of the new series of Consumer Price Index for Industrial Workers (2001+100) as presented in this tripartite meeting”.

INADEQUACIES GALORE

During the meeting, the trade unions pointed out some of the glaring inadequacies and deficiencies noticed in the compilation of the proposed 2001. They are:

•  The new series covers only following six sectors: Factories, Mines, Plantations, Port & Dock, Public Motor Undertakings, Electricity Generation and Distribution and Railways. Several sources analyzing the economic growth in the present times in our country point out that the share of services sector in the GDP has gone up significantly while the share of mining and manufacture had declined. In this context, limiting the present exercise to only these six sectors needs to be closely examined. (There may be an argument that as a separate series of price index is published for the Urban Non-Manual Employees (popularly known as middle class index), the question of factoring in the services sector is not advisable. But, the fact remains that in several service sector wage agreements, like banks, insurance, etc, the union have chosen to follow only the working class index).

•  The list of selected centres for conducting the survey, as also for compiling price-data, include 9 new centres and drop 6 centres under the 1982 series. This has been done without any consultations with either workers’ side or employees’ side.

• The data presented reveal an increase of 11 per cent in the workforce in the 78 centres covered. The weightage assigned to each center in compilation of all India average is also based on the data collected of the working population at these centres. These data have been collected from the returns filed by establishments of the six selected sectors, under the various legislations applicable to them. This data requires careful scrutiny, as it is widely reported that there is huge default by establishments in filing of returns and incidence of faulty returns is also widespread. 

• There are wide variations in the centre weightages for arriving at the all India average between the 2001 series and 1982 series. The weightage has declined in respect of 42 centres and increased only in the case of 22 centres. The decline, for example, for Kolkata, is from 4.24 (182) to 1.51 (2001) and for Bangalore from 3.27 to 1.95, while the increase for Mumbai is from 7.87 to 9.57. These variations need to be scruitinised carefully. These are only illustrative and not exhaustive.

• The work relating to consumer price index has three stages: (1) the preliminary stage of evolving the methodology, conducting of family income-expenditure-survey, deciding the fixed basket (consumption), assigning weightage, selection of centres, etc. (2) the second stage of collection of price-data at selected centres, the status of price collection machinery and (3) the final stage of actual compilation and release of index by the Labour Bureau at Shimla and the Regional Computer Centre at Chandigarh. The existing processes at all these three stages require complete overhaul and drastic improvements. The whole process requires transparency, tripartite consultations and constant monitoring.

• The trade unions must be allowed representation in the Technical Advisory Committee, which is vested with all decision-making.

These are only a few of the faults pointed out by the trade unions.

DANGER AHEAD

At the Shimla meeting, the employers’ and some government representatives also raised several objections. But, at the end all of them, however, agreed for the launch of the new series.

The labour secretary had to accept that it was a lapse that no tripartite meeting at the central level was convened at the initial stage of the work relating to compilation of the new series. He also assured to take up the issue of making the functioning of the Labour Bureau transparent and participatory. He also agreed to take up for consideration of according representation to both the employees and employers in the Technical Advisory Committee. But, he tried to go ahead with the launch of the new series under the plea that there was no compulsion for the employees and employers’ organisation to use the new series only for Dearness Allowance purposes and they can continue to use the 1982 or 1960 series. The workers’ side pointed out that once the 2001 series was launched, the 1982 series would be discontinue as was the case during the past and the linking factor alone would be used to convert the index figures into 1982 or 1960 series. If the index itself was defective, linking factor also would be defective and the workers would stand to lose. Hence, all the trade unions reiterated their opposition. The Labour Secretary concluded the meeting stating that tripartism is a three-legged race and if one leg is not willing to go along with the rest, there cannot be any movement.

It was evident during the meeting that the finance ministry was pushing for a go ahead for the launch of the new series. Dr Tarun Das, Advisor, finance ministry, who was leading his team, also conveyed that a committee had been set up for working out the modalities of publishing a Producers’ Price Index in lieu of the present Wholesale Price Index.

The Labour Secretary rounded off the meeting conveying that he would brief the labour minister of the proceeding of the tripartite meeting.

If the deficiencies and inadequacies in computing the price index series are not addressed and corrective measures not taken, the new index series will not correctly reflect the real extent of movement of prices. Rather, it will end up in under-estimating the variations in price levels. As a result, the working people will stand to lose heavily in respect of Dearness Allowance and on other counts. The proposed 2001 series not only carries all the deficiencies pointed by the trade unions, but also seeks to effect further changes, detrimental to the interest of workers. There is an urgent need for a thoroughgoing review of the whole gamut of issues raised by the trade unions, under a representative arrangement.   

Despite the unanimous opposition from the trade unions, the danger of the government of India unilaterally deciding to launch the 2001 series of Consumer Price Index is very much possible.  This must be resisted.