1572. Additional Emoluments (Compulsory Deposit) (Amendment) Bill, 1977, passed by Lok Sabha on 18-6-1977, allowed to lapse – Repayment of installments of additional dearness allowance deposit continue to be made in cash

Shri H.M. Patel, Finance Minister, made the following statement in the Lok Sabha :

“A Bill to further amend the Additional Emoluments (Compulsory Deposit) Act, 1974 was introduced in the Lok Sabha on June 11, 1977 and was passed by the Lok Sabha on June 18, 1977. The Bill sought to replace the Ordinance issued by the Vice President acting as President on May 9, 1977. It provided that (i) compulsory deposit of additional dearness allowance would cease from May 6, 1977 ; (ii) repayment of the second instalment of additional dearness allowance deposits due from July 6, 1977 would not be in cash but would be, by credit to provident fund accounts of employees. During the course of the debate in the Lok Sabha, it was suggested that the rate of interest on the proposed accretions to the provident fund should be the same as payable on the deposits impounded under the Compulsory Deposit Scheme. In order to protect the interest of employees, I readily accepted this suggestion. It will thus be seen that in bringing forward this Bill, Government’s intention was to meet all genuine demands of employees, consistent with the need to prevent resurgence of inflationary pressures.”

A large number of representations have been received by Government from employees, employees’ associations, trade unions, etc., welcoming the decision of Government to discontinue the impounding additional dearness allowance from May 6, 1977 but requesting Government to reconsider the decision to credit repayments due from July 6, 1977 to provident fund accounts of employees. These representations have been sympathetically considered by Government. Informal consultations have been held with representatives of trade unions to see if a way could be found to meet the demands of workers consistent with the continued need to curb undue expansion in money supply. In the course of these consultations, we also considered a suggestion that instead of accretion to provident funds, repayments under the Compulsory Deposit Scheme could be made in the form of bonds carrying an attractive rate of interest. However, as no consensus emerged on any alternative scheme, Government have concluded that the most practical course of action would be not to go ahead with the amending Bill.

Accordingly, as a further gesture of goodwill towards the organised working classes, it has now been decided by Government that repayment of the second instalment of additional dearness allowance deposits due from July 6, 1977 will be made in cash, and not credited to provident fund accounts of employees. In view of this decision, it has been decided not to press ahead with the Bill to amend the Additional Emoluments (Compulsory Deposit) Act, 1974 now before the Rajya Sabha for consideration. This Bill will be allowed to lapse in the ordinary course. Consequently, the Ordinance issued on May 9, 1977 will also lapse on July 23, 1977.

I must point out that the abolition of the Compulsory Deposit Scheme and the decision to honour past commitments of repayment in cash will add significantly to the money supply during the current year. Government’s decision to go ahead with the new proposed course of action, notwithstanding the expansionary effects on money supply, is due to their ardent desire to seek active co-operation of the organised working classes in solving the many difficult problems currently facing the economy. The price situation continues to remain a cause of serious concern. To contain inflationary pressures, we need to maximise production, promote savings and also restrain unproductive expenditure to the maximum extent possible. In this endeavour, Government hopes that full co-operation will be forthcoming from all sections of the people, including the workers.

Press Note : Dated 22-7-1977, issued by Press Information Bureau.

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December 2020