Thiruvananthapuram: Faced with an “unprecedented financial crisis”, the Kerala Government is all set to write to the Centre, requesting the Union Government to exclude debts incurred by state-run autonomous bodies like Kerala Infrastructure Investment Fund Board (KIIFB) from the state’s annual borrowing limit so as to facilitate more borrowings.
A decision in this regard was taken in a cabinet meeting the other day following apprehensions that the financial crunch would soon result in the state struggling, even, to find resources to meet day-to-day expenses. The State now aims to avail maximum borrowings and Chief Minister Pinarayi Vijayan himself would write to Prime Minister Narendra Modi.
Before 2017, only the borrowings made by the state directly through the Reserve Bank of India (RBI) were considered its public debt. However, the Centre brought in a new provision in 2017 that stipulated that the loans and grants availed by the state PSUs, Corporations, and Special-purpose bodies, either by including in the state budget or out of the state tax and cess allocated to them, should be considered as the public debt of the state itself. The measure was in accordance with Article 293 (3) of the Constitution, which enlists the Centre’s authority in exercising control over States’ borrowings.
The Centre started implementing the provision, originally introduced in 2017, from the current fiscal year onwards. State Finance Minister K N Balagopal said that the same would result in the state’s borrowing limit further getting restricted by an amount of Rs 24, 638 crores.
In the letter, Kerala will ask the Centre to increase the revenue deficit grants and the share of the Central tax revenue due to the state, besides restoring the GST compensation.
Though minister Balagopal had shot off a similar letter to union Finance Minister Nirmala Sitharaman two months back, the Centre is yet to take any measure in this regard.
The combining of the debt of statutory boards and companies with that of the state is contrary to the provisions of federalism and the same will imperil the borrowing capacity of the state, the cabinet observed the other day.