The Punjab Government, staring at a liability of nearly Rs 15,000 crore towards pending dearness allowance (DA) arrears, is preparing to seek breathing space from the Punjab and Haryana High Court by proposing a staggered payment mechanism instead of immediate clearance of dues.

Highly placed sources said the government is finalising a plan to release a part of the DA arrears in instalments and place the proposal before the High Court on Monday, when the matter comes up for hearing before a division bench.

The government feels that “forcing payment of nearly 10 per cent of the state budget within two months ‘borders on the realm of impossibility,’ and could cripple the government’s ability to pay regular salaries, pensions, and social sector commitments.”

The move comes after the double bench, while hearing the state’s review petition against an earlier order directing payment of all pending DA by June 30, asked the Punjab Government on Wednesday to submit a concrete repayment schedule.

‘Doesn’t have so much cash to pay immediately’

 “We will put a plan before the HC. Let us see if the court agrees. The government does not have so much cash to pay immediately. We are still in the process of preparing the plan. We are seeing if we are able to clear a liability of Rs 1,000 crore to 1,500 crore this fiscal. The plan will be put forth to the HC,” a senior officer told The Indian Express.

The state government’s review plea itself was filed after a single bench of the High Court directed Punjab to release all pending DA instalments to employees and pensioners at par with IAS, IPS and IFS officers serving in the state on the Central government pattern. The court had also rejected the state’s argument of financial constraints and ordered compliance by June 30.

‘We’re formulating a plan’: Harpal Cheema

Finance Minister Harpal Cheema, however, did not divulge any details. He said, “We are in the process of formulating a plan. It is not final yet. We will finalise it and submit it to the High Court.”

The liability of the payout on the state exchequer is Rs 15,000 crore. Sources said the government is contending that while it had adopted the Central Government “pattern” for DA, this did not automatically bind it to release DA instalments simultaneously with the Centre. “Also, the High Court heavily relied on the dictionary meaning of the term pattern and wrongly interpreted it to include the timing of release as well. The Punjab Cabinet had consciously retained flexibility over the timing of DA payments in view of the state’s precarious finances. If the cabinet were to include timing as part of its decision on the pattern, there was no need to take a separate decision in respect of timing of release of the DA,” an officer said, adding that compelling automatic parity in DA with IAS officers and judges would effectively erode the state’s power to frame its own service rules and manage public finances according to its economic capacity. “It is an attack on the state’s fiscal autonomy,” said the officer.

Admissibility of DA vs timing of release

The state is also attempting to distinguish between the admissibility of DA and the timing of its release. The government’s position is that it has never denied employees’ entitlement to DA but only sought the right to phase out payments according to fiscal capacity. The government is relying upon Supreme Court judgments, including Union of India versus PN Menon and State of  Punjab versus Amar Nath Goyal, to argue that governments retain the authority to “structure, defer or phase financial benefits depending upon fiscal capacity”.

The government is also banking heavily on the Supreme Court’s ruling in the Confederation of Government Employees case involving West Bengal, where the apex court had directed payment of only 25 per cent of the DA dues immediately, while leaving the remaining schedule to be worked out separately.

“There are borrowing limits, cash flow realities, and the impact on other expenditure heads,” an officer said. In a Supreme Court ruling in State of Madhya Pradesh versus GC Mandawar, it was directed that Article 14 cannot be invoked merely because different classes of employees draw salaries from the same treasury. Accepting such parity would effectively collapse distinctions between All India Services, judicial officers, and state cadres, thereby “taking away the autonomy of states and their fiscal policies,” he added. The case has implications for over 3.5 lakh serving employees and more than 4 lakh pensioners in Punjab.