Kerala’s financial crisis has significantly impacted government employees and pensioners, with the state owing them a staggering Rs 37,500 crore in outstanding Dearness Allowance (DA) and pay revision arrears. Of this amount, Rs 22,500 crore is attributed to DA arrears, while the remaining Rs 15,000 crore pertains to pay revision arrears.
Recent actions by the government included disbursing around Rs 3,000 crore to provide a 2% DA increase and Dearness Relief (DR) arrears to employees and pensioners. This disbursement lowered the outstanding DA from 17% to 15%, with an estimated impact of about Rs 1,500 crore on the state’s finances. However, the pending DA and DR arrears from July 2021 amount to approximately Rs 22,500 crore.
Although merging the DA arrears with employees’ Provident Fund (PF) accounts could have deferred the financial burden for the government, revised restrictions on open market borrowings have made this option less viable. Such a merger would lead to an increase in the public account, which, under new norms, affects the state’s net borrowing ceiling. Consequently, finding alternative solutions to address the financial strain becomes imperative for the state government.
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