The probe team has arrested three policemen who first took Sreejith into custody on April 7 night.
The Kerala cabinet on Wednesday decided to give compensation of Rs 10 lakh and a government job to the wife of 26-year-old Sreejith, who died in police custody in March.
Sreejith's wife, Akhila, who holds the police "primarily responsible" for how their family was "decimated", has welcomed the development.
"The steps taken by the government is good. The police are solely responsible as my husband was innocent," she said.
The victim's mother Shyamala said the government must bring officials responsible for her son's death to justice. "Each and every one who did this to my son have to be brought before the law."
"We have approached the high court seeking a CBI probe. All those police officers who did this to my son must be taken to task. None should be allowed to escape," the mother said.
Trouble started for Sreejith after 56-year-old Vasudevan hanged himself after a group of men barged into his house and threatened him.
A special squad of the police took Sreejith, father of a two-year-old, and nine others into custody on April 7 and charged them with abetment to suicide and rioting.
Subsequently, Sreejith was taken to a hospital where he died on April 9.
Following a huge uproar on the social media, the Pinarayi Vijayan government went on the defensive and a Special Investigation Team of the police-led by Inspector General S. Sreejith was given the probe.
The probe team has arrested three policemen who first took Sreejith into custody on April 7 night.
Sub-Inspector Deepak and Circle Inspector Crispin Sam have also been arrested. According to informed sources Ernakulam Superintendent of Police (Rural) AV George might also be summoned for questioning.
Mr George was transferred after it came to light the three policemen taken into custody were directly under his control.
The case has become a major campaign issue in the crucial Chengannur assembly by-election slated for May 28.