Employees would get the new DA from July this year and the state exchequer would have an additional expenditure of Rs 130 crore per month on this account, Chief Minister Oommen Chandy told reporters after the cabinet meeting in the Kerala capital.
With this, DA would become 63 percent of an employee's basic scale of pay, Chandy pointed out.
Arrears of DA up to December next would be merged with the Provident Fund account, he said.
The recommendation comes in the wake of a hike in the DA of central government employees. DA was hiked five times after the Congress-led UDF came to power in 2011.
The cabinet has also decided to give the salary scale of secretariat staff to university employees.
On the controversial issue of mineral sand mining at state coasts, Chandy said that government is not averse to supporting private sector if it helps in Value Addition.
'I am of the opinion that the rich mineral sand deposited on state coast had not been commercially exploited so far', he said and made clear that the government’s priority is to strengthen public sector units functioning in this sector.
Chandy also pointed out that there were different views in the society with regard to allowing private parities in mineral sand mining. Government would take a decision considering all facts, he said.
The Cabinet also decided to set up a Special Purpose Vehicle to implement the schemes under the Rajiv Gandhi Awaz Yojana, which has been envisaged to ensure a 'slum-free India'.
Fifty percent of the project expenditure will be funded by the Central Government while the state government and LSGDS would bear 30 percent and 20 percent respectively.