Components of Variable Dearness Allowance (VDA) Calculation
There are three components in the calculation of VDA:
1. The consumer price index (CPI).
2. The base index.
3. The variable DA amount fixed by the government through notification.
The third component will remain fixed until the minimum wage is revised. Similarly, the base index will also be fixed. The CPI will change every month.
Each industry will have a separate DA amount fixed. The minimum wage notification will specify the amount of DA per cost of living index/consumer price index. Often, it will be like DA for every point above a certain fixed base index. For example, it may be Rs 10 per point above 100. This means every increase in CPI above 100 points will result in a DA of Rs 10.
Now, if the CPI of the locality (as fixed by the Economics & Statistics Department) is 420, then the Variable DA to be given to the employees will be calculated as follows:
CPI = 420
Base Index = 100
Points for DA = 420 - 100 = 320
DA amount per point = 10
Amount of DA for 320 points = 320 x Rs 10 = Rs 3200.
With every increase in CPI, the DA will increase by Rs 10. That is why it is called Variable Dearness Allowance.
Regards,
Madhu.T.K