What Is VDA in Karnataka's Minimum Wage? Understanding the 4 Paise Per Point Rule

Please explain what VDA is? I found the following statement at the end of the Minimum wage schedule in Karnataka: "In addition to the basic wages, all categories of employees in the state shall be paid V.D.A. at the rate of 4 paise per point over and above 7616 points."

Please shed some light on this statement on how to implement minimum wages.

Understanding VDA in Karnataka's Minimum Wage Schedule

In addition to the basic wages, all categories of employees in the state shall be paid V.D.A. at the rate of 4 paise per point over and above 7616 points. This means that a variable dearness allowance (VDA) of four paise is to be paid for every increase in the Consumer Price Index (CPI) over 7616 points. The CPI is fixed by the Directorate of Economics and Statistics considering the price changes in various cities in the state.

Calculation Example

Suppose that the average CPI is 9469, then 1853 points (9469-7616) would earn DA at the rate of 4 paise per point, and the VDA will be 7412 paise or Rs 74.12 per day. This is to be paid in addition to the Basic Pay for the day. If the basic pay is monthly fixed, then Rs 74.12 multiplied by 26 equals Rs 1927 should be paid as VDA.

Base Year and Conversion Factor

I believe that the VDA quoted above is based on 1987-88 figures. The latest available base is 2018=100, and the linking factor to convert from the old base of 1987-88=100 to the 2018 base is 8.5. The CPI for 1987=100 is 1114.

What is VDA?

VDA means Variable Dearness Allowance, which varies with the Consumer Price Index (CPI) fixed against one base year.

In this case, there is probably some VDA already in place against a specific consumer price index. Now, after a certain index point increase in CPI, there will be a change by a neutralization factor.

The Consumer Price Index changes with the price increases of different commodities, which have been considered in determining the CPI in this scenario.

Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons]