How the dearness allowance case in West Bengal is coming to a head

Dearness allowance (DA) is the extra money given to employees and pensioners to deal with rising prices. In India, with a humble beginning during World War I, DA for government employees has, since Independence, become a rule rather than an exception. In the West Bengal DA case, the country eagerly awaits the Supreme Court’s pronouncement on whether DA is a fundamental right of government employees.

 

A legal dispute on delays in payment of DA, festering since at least 2017 in the West Bengal Administrative Tribunal and High Court, has finally reached the Supreme Court in an appeal. The higher courts have rejected the claim that DA payments fall within the discretionary authority of the state government, and that employees have no enforceable right. The government had pleaded that paying the claimed DA arrears would lead to financial disaster. In an interim order on May 16, 2025, the Supreme Court ordered the release of at least 25 per cent of the DA amount due and payable to all the employees within six weeks. One estimate puts this amount at ₹10,000 crore. The final order is awaited.

 

Two important questions: First, amidst a fiscal crisis, how is the West Bengal government going to find the ₹10,000 crore? Second, what issues, among many others, is the Supreme Court likely to take into account in its final order, when it considers the question of whether the right to DA is a fundamental one or not?

 

First, the backdrop. During the last few years of the 34-year-long Left rule, West Bengal Services (Revision of Pay and Allowances) Rules, 2009 (ROPA Rules, 2009) governed DA for government employees from January 1, 2006 with retrospective effect. With the Left government continuing to revise and pay DA to its large employee population at more or less the same time and rate as the central government, its DA bill was the highest of all states.

 

 

After coming to power in 2011, the Trinamool Congress (TMC) government, under Chief Minister Mamata Banerjee, broke the DA parity with the central government, except for officers of All-India cadres such as the Indian Administrative Service (IAS) and Indian Police Service (IPS), and employees posted in New Delhi or Chennai. One of the main problems with the West Bengal government’s decision may have been its contravention of ROPA 2009, before introducing ROPA 2019.

 

The chief minister had appointed the state’s Sixth Pay Commission on November 27, 2015, and the employees’ association had approached the Administrative Tribunal challenging the DA delays. The Sixth Pay Commission was given several extensions. Finally, on September 13, 2019, without disclosing the report even to the Vidhan Sabha, Banerjee announced that the recommendations of the Sixth Pay Commission would be implemented from January 2020, benefitting 850,000 employees and costing the government an additional Rs 10,000 crore.  She also blamed the Left government’s legacy of a huge debt burden, the servicing of which had strained the state exchequer and led to the delay in the pay revision.

 

The West Bengal government came out with revised ROPA Rules on September 25, 2019 with two novel features. First, the absence of any mention of the term DA, except in the definition of existing emoluments arrived at by adding existing basic pay and existing DA on January 1 2016, and for calculating the revised salaries of doctors. Second, it stipulated that there would be no payment of any arrears to the employees for the 2016-2019 period.

 

So, how is the West Bengal government going to respond to the Supreme Court’s interim judgement? It can ask for expediting the final judgment, and pray for some extension to the six-week deadline. But defying the order entails the risk of some senior officer facing contempt of court – and even imprisonment. Also, remember that in November last year, in Himachal Pradesh, the High Court had ordered the attachment of Himachal Bhavan in Delhi when the government failed to pay a hydroelectric company its court-ordered dues of Rs 64 crore.    

 

One estimate puts the DA arrears at around ₹ 40,000 crore. So, assuming that the West Bengal government will pay the directed quarter of this sum in six weeks and avoid a Constitutional crisis, how will it find the money? The required ₹10,000 crore, which has not been provided for in the Budget, will necessitate some hard decisions. The limit on Ways and Means Advances (WMA) from the Reserve Bank of India (RBI) is ₹ 3,456 crore. With total receipts budgeted at ₹3,74,191 crore in 2025-26, with a uniform cash flow through the year – a heroic assumption – the receipt will be ₹43,176 crore in six weeks. How does the government save around ₹6,544 crore, after taking into account WMA, from this ₹43,176 crore in six weeks?

 

General services, which include salaries, pensions, and interest payments, exhaust more than a quarter of the funds. Another 9 per cent goes for loan repayments. Economic services have already been squeezed to the bare minimum, leaving only social services claiming 42 per cent of the funds. Some of the social service schemes, for example Lakshmir Bhandar, with a budgeted outlay of as much as ₹ 18,691 crore – or almost 5 per cent of the total Budget – are big and ambitious projects.  Given their professed efficacy in mobilising votes, will Banerjee try to save money on these by moving from a generalised scheme to a scheme targeted only to the poor? Time will tell.

 

The answer to the second question – what issues the Supreme Court will take into account in its pronouncement on the larger question of DA – is difficult to anticipate. Three, however, seem to stand out. First, the problem of DA has its roots in high inflation. DA will lose much of its salience if the central government and the RBI can maintain price stability and keep the lid on annual inflation at its targeted 4 per cent. Second, will it distinguish among employees and pensioners according to salary and pension levels? The same logic of having a legal minimum wage extends to protecting all employees’ emoluments and pensions from falling below subsistence level through DA. But it loses its strength for higher level employees with higher salaries. Differential DA will lead to a decline in the maximum to minimum emoluments, or compression ratio, but this problem can be resolved by the periodic Pay Commissions. Third, annual budgets need to be drawn up with much more care. Salaries and pensions need to be budgeted for after carefully factoring in the likely rate of inflation.

 

The author is a Bharatiya Janata Party member of the West Bengal Legislative Assembly and a former Chief Economic Adviser in the Union Finance Ministry