E-Paper
‘Will be in big trouble’: Kerala FM urges Centre not to reduce borrowing limit
Kerala finance minister K N Balagopal said some of the actions of the Union government in the last five years including the move to fix the states’ borrowing limit have crippled the financial position of the state
Kerala finance minister K N Balagopal has requested Union finance minister Nirmala Sitharaman not to consider liabilities of the state entities while determining the net borrowing capacity of the state.
In a letter written to Sitharaman on June 22, which was released to the media on Tuesday, Balagopal contended that liabilities of the state instrumentalities, like statutory bodies and companies, will not come under the ambit of the state debt. He said some of the actions of the Union government in the last five years including the move to fix the states’ borrowing ceiling crippled the financial position of the state.
He said combining the debt of statutory bodies and companies with that of the state government was contrary to the provisions of the constitution and will imperil the borrowing powers of the state and jeopardise its developmental plans. He said the state’s revenue was dropped by ₹23,000 crore due to various measures of the union government.
“Financial health of the state has been affected by reduction in the revenue deficit grant to the tune of ₹7,000 core this year and loss due to stoppage of GST compensation was around ₹12,000 crore. Besides this, in the name of off-budget borrowing it made a reduction of ₹4,000 crore in the net borrowing limit of the state,” he said in the letter.
If the situation continued like this, the socio-economic security system that the state built over the last several decades will be in jeopardy, he said. Unless the Centre recognised the reality confronting the state, particularly in the aftermath of Covid pandemic, the state will be in big trouble, he added.
The Union government earlier rejected the state’s contention that ₹14,000 crore borrowing under the Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala Social Security Pension Limited (KSSPL) were not direct debt for the state. It informed the state that these will be considered as off-budget borrowings and will be reduced from the overall borrowing limit of the state.
The state’s cumulative debt crossed ₹3.32 lakh crore, the government informed the Assembly in March. The total debt liability increased more than two-fold in last few years, it said blaming the pandemic and new tax regime for this. Experts said if the situation continued like this salaries, pension and social security pensions may take a hit in the second half of the financial year.
Last week the Enforcement Directorate (ED) sent a notice to former finance minister Thomas Issac in connection with the alleged violations in the financial dealing of Kerala Infrastructure Investment Fund Board (KIIFB) but he refused to appear before the central agency citing his prior engagements.
KIIFB is the agency of the state government for large infrastructure projects and last year it raised ₹2,150 crore through masala bonds as part of its plan to mobilise ₹50,000 crore to fund various projects in the state. “The Union government is envy of developmental projects carried out by KIIFB. So it wants to damage it,” said Issac. The Comptroller and Auditor General (CAG) has questioned some of the dealing of KIIFB multiple times.
