Centre rejects Kerala's demand to borrow more

Thiruvananthapuram: The Central Government has rejected Kerala's demand to borrow additional funds even as the State struggles to fund its day-to-day expenses.

The Union Finance Ministry has replied that the State's demand is against the Fiscal Responsibility Act. The state is allowed to take only three percent of the gross state domestic product (GSDP) as loans.

Kerala had hoped to get Rs 8,000 crore as additional loan. Following this, the State Finance Department has expressed concern on how to find money for day-to-day expenses in the upcoming months. 

Considering the acute financial crisis in the state, State Finance Minister K N Balagopal had personally met Union Finance Minister Nirmala Sitharaman to request a waiver in the borrowing limit. The minister had requested the permission to borrow an additional one percent as loans.

The Finance Additional Chief Secretary also visited Delhi last month and lobbied the Union Finance Ministry officials to secure this demand. However, the Central Government handed over a letter the other day stating that the state's demand cannot be granted.

Heated debate in Kerala assembly

The Kerala Assembly on Wednesday witnessed heated exchanges between the ruling Left and the opposition UDF over the state's financial situation during a debate on the matter.

While the Congress-led opposition alleged that the extravagance, financial mismanagement, and poor tax collection by the Left government have pushed the state into an economic crisis, the Left Front blamed central policies for the same and accused the UDF of taking sides with the BJP-led Centre on the matter.

State Finance Minister K N Balagopal claimed that even as Kerala saw a substantial increase in its income and tax revenue in the last year, the BJP-ruled Centre was adamant on financially choking the state, which is why its share in central taxes, its borrowing limit, and its revenue deficit grant were cut short. The minister also said the debt burden of the state was going down while its income and tax revenue increased by around 51 per cent last year -- a historical gain compared to previous years.

UDF MLA Roji M John, who moved a notice, claimed that the 15th Finance Commission had in 2020 allocated around Rs 53,000 crore to the state as a revenue deficit grant for the period from 2021-26, but Kerala used up most of that, except around Rs 4,000 crore, by 2023.

Regarding Balagopal's claim that the Centre cut short the state's borrowing limit by unfairly adding the loans taken by KIIFB to the debt of Kerala, John contended that UDF from the start had warned it would happen, but the same was disregarded by the Left Front.

Leader of Opposition (LoP) in the assembly V D Satheesan and senior Congress leader Ramesh Chennithala too spoke along similar lines during the debate. Satheesan said that the state government failed in tax collection and its decision to increase fuel prices has led to a drop in diesel sales in the state as some people were buying it from neighbouring Mahe and selling it here in black. He also claimed that the state lost more than Rs 50,000 crore as IGST due to non-submission of proper documents and the same has been pointed out in reports of the Gulati Institute and the report of the Expenditure Review Committee.

Balagopal and Chief Minister Pinarayi Vijayan, however, accused the UDF MPs of not following through with their promise to jointly approach the Union Finance Minister and present a letter against the Centre's financial policies. Irked by the repeated blaming of the UDF MPs, Satheesan said the Left Front had not answered the issues raised by the opposition and was only intent on blaming the MPs and therefore, they were staging a walkout.

(With PTI inputs.)