Thiruvananthapuram: Kerala government has conveyed its protest to the Centre against its stand opposing the borrowings through Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala Social Security Pension Limited (KSSPL) and reduction on the borrowing limit.
State Finance Minister K N Balagopal has written to Union Finance Minister Nirmala Sitaraman seeking to revoke this action.
The Centre had earlier rejected Kerala’s claims that the Rs 14,000 crore borrowings under KIIFB and KSSPL are not direct debt for the State. It had informed the State, earlier this month, that these would be deemed as off-budget borrowings and would be reduced from the overall borrowing limit of the State.
Speaking to Manorama News, Balagopal said, Kerala strongly protests this move by the Centre and the State would cooperate with other States and make a joint move seeking to change the Centre’s stand.
The State Government had strongly protested and remarked in the Assembly against the Centre’s move to cut KIIFB and KSSPL borrowings. The letter states that the Centre’s move violates the State’s Constitutional rights.
The Reserve Bank of India’s letter to the public sector banks to refrain from lending for Government projects which do not generate revenue is also adverse to State’s development projects. It may affect the KIIFB projects.
Kerala had raised this issue during the annual meeting organised by the RBI for the Finance secretaries last month. The State has decided to continue its attempts to resolve the issue through secretarial-level interventions.
Balagopal has contended that liabilities of state instrumentalities, like statutory bodies and companies, do not come within the definition of state debt.
Therefore, combining debt of such entities with that of the state government is contrary to the provisions of the Constitution and would "imperil" the borrowing powers of the states and "jeopardise" their development plans, he has said in his letter dated July 22.
However, on July 25, Sitharaman, in a written reply in the Lok Sabha, said that borrowing by state public sector undertakings or their special purpose vehicles (SPVs) will be considered as borrowing by the state government needing consent.
Balagopal, in his letter, has said that Kerala is currently facing a grave financial crisis which poses a serious threat to the government in sustaining spending on welfare schemes for the poor, including housing, education and health among others.
"The financial health of the state has been seriously affected by a reduction in the revenue deficit grant to the tune of around Rs 7,000 crore this year and loss due to stoppage of GST compensation of around Rs 12,000 crore.
"In addition, the Ministry of Finance has arbitrarily, in the name of off-budget borrowing, made a reduction of approximately Rs 4,000 crore in the net borrowing limits of the State. In all, the State government will have to contend with a reduction of Rs 23,000 crore in the financial resources available to it for financing the budget in the current financial year," he has said.
If these realities being faced by Kerala, as it struggles to emerge from the "economic debilitation wrought by the COVID pandemic", are not recognised by the Centre, the socio-economic security system that the southern state has built over the last several decades will be in jeopardy, Balagopal has said.
