In the wake of the High Court staying the 'salary deferment' order for two months, the Cabinet on Wednesday decided to promulgate an ordinance to operationalise the decision to deprive government employees and teachers six days' salaries each month for five months.
The High Court, in its order on April 28, sounded sympathetic to the government's exigencies but still found that the order was not properly backed by the law. “However much I tried to bring the impugned order (the deferment order on April 23) within some framework of the law, I could not find any basis for such any order in any of the statutes. Neither in the Epidemic Diseases Act as amended by 2020 Ordinance, or in the Disaster Management Act could I seek solace to justify issuance of the order,” Justice Benchu Kurian Thomas said.
The Judge agreed with the petitioners that salary was 'property' as defined in Article 300A of the Constitution, which says that no person should be deprived of his property.
The Court also pointed out that from the April 23 order it was not clear how the money taken out of the salaries was to be utilised.
Legal cover for salary cut
The Cabinet has decided to address the issues raised by the High Court in the proposed ordinance. Therefore, to give the decision a solid legal footing, the Ordinance would authorise the government to set aside up to 25 per cent of the salary of government employees in times of emergency.
The April 23 order had left the salary deferment open-ended. It merely said that a part of the salary would be set aside for five months beginning April, and had nothing to reassure the deprived employees.
The proposed Ordinance will speak of a notification. The notification, which would be issued within six months, will lay down how the deferred portion of the salary would be given back.
Postponing six days' salary for five months is expected to free up about Rs 2000 crore, approximately Rs 500 crore each month. Usually, the government requires nearly Rs 4000 crore (Rs 2400 crore as salary and Rs 1500 crore as pension) to meet the monthly salary and pension benefits.
Measure of last resort
Finance Department sources said with not much revenue to speak of the government had no choice but to defer salaries. The state's own tax revenue - including GST, sales tax on petrol, and revenue from excise and lottery - had dwindled to Rs 250 crore. Even a weak month would have generated at least Rs 3000 crore.
The monthly Goods and Services Tax revenue, which on an average month would be Rs 1800 crore, has now shrunk to Rs 180 crore. The sales tax from petrol, which had consistently been over Rs 600 crore every month, has all but dried up. What the government got this time was a pittance, Rs 26 crore.
Already, before even the first month of the 2020-21 fiscal is over, Kerala has borrowed Rs 6000 crore. Normally, this happens over a period of four or five months. With budgetary allocations to the Health and Civil Supplies departments scaled up, the government is all set to go for a second round of open market borrowing soon.
Logic of HC stay
However, it is also said there was a reason why the High Court had stayed the operation of the salary deferment order for two months. By then, the Centre would have raised the borrowing limit of sates. Now, they can borrow just 3 per cent of their GDP. If this is raised by at least one per cent, Kerala could borrow an additional Rs 9000 crore.
