Thiruvananthapuram: Kerala is staring at an unprecedented financial crisis and finding resources for meeting the expenses in March would be an almost impossible task for the state.
The situation has been aggravated with the Central Government reducing the credit limit for the state during the current financial year ending on March 31 to Rs 937 crore. Official sources indicated that the state would be forced to implement a drastic cut of up to 35 per cent in the Plan Outlay this year owing to the cash crunch. During the previous fiscal year, Kerala had cut the Plan Outlay by 25 per cent after it faced a similar situation. However, the crisis is deeper this year, said officials.
Incidentally, Kerala’s Plan expenditure is only 56 per cent so far this financial year, even though only one-and-a-half months are left for the year to end.
Plan Outlay is the annual aggregate plan for the State for a financial year.
Income Rs 10,000 crore only
The usual practice in Kerala every year is to complete projects quickly at the end of the financial year and spend money. This year too, the state government was hoping to spend around Rs 25,000 crore on this account from the Treasury in March. However, the total income of the state currently stands at a mere Rs 10,000 crore, which includes tax revenue of Rs 6,000 crore, non-tax revenue of Rs 500 crore, credit of Rs 937 crore and other sources of money.
Expenses remain high
The sudden crisis has emerged after the Centre slashed the credit limit. During March, Kerala would have to spend at least Rs 5,000 crore for paying interest on previous loans, salary of employees, pensions and various subsidies. These are mandatory expenses.
With the remaining Rs 5,000 crore from its total income of Rs 10,000 crore, Kerala would not be able to meet even 25 per cent of its Plan expenditure. “The state has not witnessed such a severe crisis for some years,” said sources in the Finance Department.
In order to distribute welfare pensions for two months, there is a move to avail a loan of Rs 2,000 crore from the Cooperative Bank, said the sources. Another move is to collect an advance payment from the Kerala State Beverages Corporation. Welfare Fund Boards having a cash surplus also will be approached for money.
Kerala is already utilizing the ways and means advance of Rs 1,600 crore provided by the Reserve Bank of India. In March, the state would have to seek an overdraft of another Rs 1,600 crore.
The state uses the overdraft facility only as a last resort.