In a bid to mobilise resources to battle the coronavirus pandemic and its fallout, the Indian government has frozen most of the allowances to around 11 million of its employees. The government stated that the move to freeze Dearness Allowances (DA) of employees will help it to save around $5 billion in the next two years. If state governments across the country follow suit on the expected lines, total savings from the decision will be around $12 billion.
India's Ministry of Finance, in a notification, stated that it was requested to relax the expenditure limit between April and June by 20%, which includes the payment of only regular salaries, including child education allowances.
Other payments, such as salary arrears, leave travel compensation, leave encashment, etc., will not be made during the period from April to June 2020. It also restricted the allowances for medical treatment, but with exceptions for emergency cases.
The decision contradicts guidelines issued by the government in which it advised both private and public sector employers to refrain from job cuts, staggered payments, or a reduction of salaries, including those of casual workers.
On 29 March, India's Ministry of Home Affairs issued an order stating that all employers should pay wages to their employees on the due date “without any deduction” during the lockdown period. Similar appeals were made by Indian Prime Minister Narendra Modi on several occasions.
Trade Union and Opposition Fume
The Centre of Indian Trade Unions - the country's biggest trade union, having members in the millions - has strongly objected to the government’s decision to freeze allowances and urged that the response to the financial crisis by the central government must start with measures to garner resources where it is aplenty at the disposal of a handful of the ultra-rich class.
"Wealth of India’s richest one per cent is four times more than the 70% percent of population. Gov't must tap this huge accumulation of wealth with barely 5% of ultra-rich, amassed mostly through undue and illegitimate patronization of the economic policy regime”, Tapas Sen, general secretary of the CITU, said.
The prime opposition party Congress also slammed the move, terming it "insensitive and inhumane".
"It is an insensitive and inhumane decision of the government to cut DA of central employees, pensioners and jawans who are serving the public while fighting coronavirus, instead of suspending the bullet train project and the Central Vista beautification project of lakhs of crores (of rupees)", Congress leader Rahul Gandhi said in a tweet in Hindi.
Further Blow to Economy
While the coronavirus pandemic is having a devastating impact on the Indian economy, with businesses and industries shut, the salary cuts and job losses will further deepen the crisis, the government has admitted on several occasions.
Government employees across the country, which constitute around 22 million individuals, are one of the major consumers who can boost demand as private sector employees are witnessing cuts in salaries and losses of jobs.
PM Cares Fund
It is not the only allowances that are being cut, as earlier, different ministries and departments voluntarily decided to contribute a one-day salary until January 2021 to the PM CARES (Prime Minister’s Citizen Assistance and Relief in Emergency Situations) Fund, which was created by Prime minister Narendra Modi on 28 March to invite support against COVID-19.
Celebrities, organisations, businessmen, and even the common people in the country were loosening up their purses to help the nation in the fight against the coronavirus. It collected a total of $1 billion in just eight days after commencing.
Nevertheless, controversy has already arisen around the intention behind setting up a separate fund for COVID-19, despite the presence of the PM Relief Fund for years. The opposition Congress Party's President Sonia Gandhi, in a letter to Prime Minister Narendra Modi, demanded the transfer of all money under the PM-CARES fund to the Prime Minister’s National Relief Fund to “ensure efficiency, transparency, accountability and audit” and termed it a “waste of effort and resources” to create two separate silos for the distribution of funds.
Left-wing parties have also raised eyebrows, as the receipts for donations to the PM-CARES fund are not available.