Amid DA tussle: Punjab’s per capita ‘employee cost’ highest among major states

A substantial portion of Punjab’s revenues goes into meeting committed liabilities – salaries and wages, pensions, and interest payments – limiting the fiscal space for development spending. In the 2026-27 financial year, committed liabilities of ₹90,335 crore are estimated to consume approximately 72% of the state government’s revenue receipts of ₹1,26,190 crore

Punjab, which is currently facing a standoff between the state government and its employees and pensioners over the payment of dearness allowance (DA) arrears, carries one of the heaviest employee-related expenditure burdens among the major states in the country.

The per capita salary expenditure of Punjab was among the 18 major states at approximately ₹11,000. (HT)

The per capita salary expenditure of Punjab was among the 18 major states at approximately ₹11,000. It was followed by Tamil Nadu, Kerala, Maharashtra and Andhra Pradesh, where the per capita salary expenditure ranges between ₹11,000 and ₹10,000 in 2023-24, while Bihar’s per capita spending on employee salaries was only ₹4,500, according to estimates available in the 16th Finance Commission report.

Similarly, Punjab also ranked among the major states with the highest per capita pension expenditure at approximately ₹6,800, second only to Kerala with around ₹7,000. The panel’s report was tabled in Parliament on March 1.

With these employee-related costs, a substantial portion of Punjab’s revenues goes into meeting committed liabilities – salaries and wages, pensions, and interest payments – limiting the fiscal space for development spending. In the 2026-27 financial year, committed liabilities of ₹90,335 crore are estimated to consume approximately 72% of the state government’s revenue receipts of ₹1,26,190 crore. At ₹39,115 crore, salaries and wages is the largest component, accounting for 43% of committed liabilities, while the estimated expenditure of ₹22,465 crore on pensions and other retirement benefits makes up around 25%.

“A large portion of the budget is already tied up in committed liabilities. Add to this the hefty subsidies and the funds available for growth-oriented spending are limited. Capex takes the biggest hit,” a finance department official said on condition of anonymity.

Pressure mounts on govt to clear DA dues, restore OPS

The Aam Aadmi Party (AAP) government is facing increasing pressure from over 7.50 lakh employees and pensioners to release the pending 18% dearness allowance arrears and restore the old pension scheme (OPS).

“There is discrimination in payment of dearness allowance to employees in the state. IAS, IPS and other All India Services officers get 60% DA, while state employees get only 42%. The high court has already given clear directions to the state government to clear the DA arrears, but it has yet to comply with the order. We want the government to implement the decision at the earliest,” said Sanjha Mulajam Manch coordinator Sukhchain Singh Khehra. The DA liability is estimated at ₹14,191 crore.

However, state authorities argue that the dearness allowance on the central pattern cannot be granted because most of state government employees have historically received salaries substantially higher than their central government counterparts, with several cadres even drawing 30% to 70% higher salaries under the state’s pay structure. Despite receiving DA at 42%, compared to the central government’s 60%, government employees in many categories receive higher aggregate monthly salaries because of the state’s higher pay scales, it said.

Recently, the state government announced a hike in the DA of around 85,000 government employees, recruited after July 17, 2020, and receiving salaries on the central government pattern, to 60%. Punjab Civil Secretariat Staff Association president Sushil Kumar, who was transferred to Mohali during the employees’ stir, said that the dearness allowance was a cost-of-living adjustment to offset the impact of inflation and had no connection with employees’ pay scales. “They (government) keep talking about a lack of fiscal space. The government has repeatedly stated that there is no dearth of funds. We believe it, otherwise, they won’t be distributing freebies,” he said.

Finance minister Harpal Singh Cheema said the state government had already cleared dues amounting to more than ₹5,000 crore. “The government is always open to discussing all their other demands for a reasonable solution. We have been talking to the employees and their various associations all through,” he said.

Khehra, who, along with other Morcha leaders was scheduled to address a press conference on Thursday, said they postponed it following a message from the chief secretary that the chief minister would hold a meeting with employee leaders on September 18.

Surging committed liabilities

The state’s committed expenditure has surged by 132% over the past 10 years, going up from ₹38,919 crore in 2016-17 to ₹90,335 crore in 2026-27 (budget estimate). Salaries and wages, the largest component, grew by 111% and pension expenditure saw an increase of 156% during this period. The expenditure on interest payments rose by 147%.

According to a study of state finances based on fiscal performance over the period from 2012-13 to 2023-24, the expansion of government services, coupled with rising life expectancy, has contributed to the growing number of pensioners. The demographic shift, along with routine staff recruitments and the implementation of the Sixth Punjab Pay Commission, led to a continual rise in salary and pension-related expenditures. “The upward trajectory in committed expenditure, with a compound annual growth rate of approximately 8.2%, highlights growing fiscal pressures on Punjab’s finances,” it said.