An Omnibus Prodesse

In the month of March 2024 the Government of India announced dearness allowance hike by four percent raising this key allowance to 50 percent for over 50 lakh government employees and 67 lakh pensioners which triggered automatic revision in several allowances by upto 25 percent, effective from January 2024.

Accordingly the Ministry of Personnel, Public Grievances and Pensions, Department of Pension and Pensioners’ Welfare Government of India Office Memorandum No. 28/03/2024-P and PW(B)/Gratuity/9559 dated 30-5-2024, the maximum limit of Retirement Gratuity and Death Gratuity under Central Civil Services (Pension) Rules, 2021 or the Central Civil Services (Payment of Gratuity under National Pension System) Rules was increased by 25 percent  i.e. from Rs. 20.00 lakh to Rs. 25.00 lakh with effect from 1-1-2024 as per the Government’s decision in implementation of the recommendations of the Seventh Central Pay Commission. For a considerable majority of employees it is no matter of gamboling as there lies nothing for them to rejoice but of pondering and suggesting wise counsels to the helmsmen to enable its inclusiveness to make gratuity an omnibus prodesse.

The Gratuity Rules are formed under the Payment of Gratuity Act, 1972 which was passed by the Parliament of India on 21-8-1972 and came into force on 16-9-1972. It is a welfare legislation that falls under Labour Laws. It is a onetime payment to an employee who superannuates or retires or resigns after putting in a satisfactory qualifying service of at least five years and  is tax exempt under Section 10(10)(i) of the Income Tax Act,1961.

The amount of gratuity payable to a retired government employee depends on two factors: i) Last drawn amount of monthly basic salary and, ii) number of years of service qualifying for entitlement to payment of gratuity. The Governments from time to time have been following the practice and precedence of increasing the amount of gratuity since long. The tax exempt gratuity limit had been already raised to Rs. 20.00 lakh for many government employees as per the 7^th Central Pay Commission recommendations effective from 1-1-2016 as notified by the Government of India in July 2017.

The sole motive behind every increase each time is /should be to ease the financial position of the employees and not a particular employee or a class of employees. However, a bird’s eye view shows that immediate and only beneficiaries of this move are senior level employees and the bulk of the workforce of the working class does not  gain from such enhancements. When amount of gratuity was Rs.3.50 lakh, Rs. 10.00 lakh and Rs.20.00 lakh it was only the upper level which got the dividends. Analyzing the effect of enhancements it lucidly surfaces that a particular layer of employees is benefitted leaving a major workforce ignored each time. To simplify the assertion take the two events of enhancements of Rs. 20 lakh and Rs.25 lakh into consideration. The benefit of increase to Rs.20 lakh accrued/accrues only to those employees whose basic pay was/is Rs.81,000/ per month. Similarly the hike to Rs.25 lakh advantages only the employees having basic pay of Rs.1,51,000/ per  month. It is enriching the rich. Obviously a group of government employees having basic pay of Rs.81,000/ and Rs.1,51,000/ is by way of pay a financially  strong class enjoying other service perks as well. This increase makes the stronger group more strong and weaker one weaker contributing to the bandwagon of causes responsible for widening incessantly gap of economic inequality.

Interplay of market forces of price lines, price elasticity of demand and the  supply curve  are also effected. Since prices are set by the purchases made by the elite group whereas demand curve stagnates or contracts from the weak majority resulting in curtailment of supplies, rising prices, reduction in production and manufacturing due to deepened low purchasing power.

As payment of gratuity is an element of goodwill gesture from government, a better course would have been to make an increase of certain reasonable percentage of last drawn monthly basic pay of all class and categories of employee rather than quantum jump for a few which winnows the majority characteristics and overlooks the spirit of this welfare legislation. An ordinary prudence would grasp that no welfare legislation can revamp the financial health of personnel of any entity unless and until it has an all-encompassing character.

This would serve as a poverty elevation and alleviation measure resulting in increasing the purchasing power, helping in establishing and stabilizing economy that makes everyday life more affordable thus enjoyable as well. It will facilitate potential to create access to more goods & services by boosting demand, production, manufacturing and quick & sufficient supplies which are essential for a sustainably growing economy. Employees concerned hope that Government may make a goodwill gesture by contemplating a formula to make this conditional enhancement in the amount  of gratuity an altruistic one with due regard to interests of public exchequer.

The author is a former Sr. Audit Officer and Consultant in the A.G’s Office Srinagar.