The state finance department sources said the decision to implement the recommendations was a political one but had little financial prudence. Principal Secretary of Finance Anoop Mishra said, “It will put huge pressure on the state finances.”

The actual burden on the exchequer may be much more than the estimated Rs 5,189 crore after the merger of Dearness Allowance in the basic salary and revision of the allowances, said an official.

These estimates appear strange considering the fact that for the 2008-09 budget, the government had estimated a revenue surplus of Rs 11,000 crore which is more than enough to take care of the new liability.

It raises suspicion that the projected surplus was caused by numbercrunching. According to an official, there are several factors that will wipe out the surplus. 
* In August, the government is seeking supplementary expenditure of Rs 6,000 crore and is likely to seek more in January-February 2009. 
* In July, the government revenue had slumped by Rs 250 crore.
* This is an election year and the estimated revenue collection of Rs 30,000 crore is likely to dip by 15-20 per cent.

Given this background, there is a greater possibility that the inflated wage bill after the implementation of the pay commission report may push the state into financial mess.

As of now, there is little to refute this prognosis. The government expects a ‘UP development policy loan’ of Rs 15,000 crore from the World Bank, but the plans may run into rough weather considering the strained relations of Chief Minister Mayawati with the UPA government.

Sources in the Finance Department said Monday’s decision may wipe out the benefits which had accrued to the state following a series of unpopular but financially prudent decisions which were taken by the Kalyan Singh government in 1998 to avail a loan under the ‘Structural Adjustment Programme’ of the World Bank.

The UP government had then decided to recover the user charges for various services like education, health and irrigation. Grants to the universities were frozen and nearly 250 construction divisions of PWD and irrigation, which had little or no work order, were abolished.