Kerala government lifts dearness allowance by 2%
The increase takes the allowance to 37% of basic pay for state employees and pensioners, effective 1 January 2026, with payments starting in November.
Kerala Raises Employee Allowances
The Kerala state Finance Department announced a 2% increase in dearness allowance (DA) and dearness relief (DR) for government employees and pensioners. This adjustment brings the total allowance to 37% of basic pay, up from the previous 35%. The new rate is effective from 1 January 2026.
Enhanced DA will be disbursed with the October salary in November 2026, while revised DR will accompany the November 2026 pension.
Broad Scope of Beneficiaries
The hike applies to a wide range of state personnel, including government employees, teachers, and staff in aided schools, private colleges, and polytechnics. Full-time contingent employees and local government staff also qualify. State service pensioners, family pensioners, and ex-gratia pensioners are covered.
This latest revision follows an earlier increase in February 2026, which saw DA and DR rise from 25% to 35% of basic pay.
Funding and Enterprise Autonomy
State public sector undertakings (PSUs), statutory corporations, autonomous bodies, boards, and grant-in-aid institutions following the state's DA/DR pattern are also eligible. These entities must obtain board approval and cover the additional costs from their own financial resources.
Organisations unable to meet the expense without government grants require prior state approval, unless over 90% of their salary or pension expenditure is already covered by government funds.
Local governments are responsible for funding the additional expenditure from their own budgets. However, major state-owned enterprises like the Kerala State Electricity Board (KSEB) and the Kerala State Road Transport Corporation (KSRTC) are not automatically included; they must issue their own separate orders for DA and DR adjustments.
This increase in disposable income for a large segment of Kerala's population could stimulate consumer spending within the state, while also placing further demands on public finances.
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