It has been more than a week since finance minister K N Balagopal sought clarification from the Centre on the amount of money Kerala could borrow from the open market.
According to the Kerala government, the Union Finance Ministry has still not bothered to respond.
The ministry's last communication with Kerala was a letter sent on May 26. On the basis of this, Kerala officially holds that it could borrow only Rs 15,390 crore. As per the 15th Finance Commission recommendations, Kerala can borrow Rs 32,442 crore.
Though allegedly unresponsive to Kerala's posers, the Union Finance Ministry has furnished Onmanorama a note on Kerala's open market borrowing (OMB) limit for 2023-24. The note says Kerala's OMB limit for 2023-24 is Rs 20,521 crore, and not Rs 15,390 crore as understood by Balagopal.
Shut to Kerala, open to media
However, this clarity was not found in the official communication received by Kerala government on May 26.
Here is how it was worded: "It has been decided by the competent authority in Government of India to accord sanction to the state government of Kerala under Article 293(3) of the Constitution of India to raise Rs 15,390 crore under the proposed borrowing programme of the state for the year 2023-24."
Kerala cannot be faulted for interpreting this to mean that Rs 15,390 crore is the OMB limit for the entire fiscal.
The official note received by Onmanorama clearly states that the OMB limit for 2023-24 is Rs 20,521 crore, and adds: "Out of the OMB of Rs 20,521 crore opted by the State Government, consent of Rs 15,390 crore (being 75%) has already been issued for first nine months of the financial year. Consent to borrow the remaining amount from the open market will be considered in the last quarter of FY 2023-24."
A top finance department official was more amused than irritated. "They give such crucial information to the media and BJP leaders, not to the Kerala Government," he said. Union minister of state for external affairs V Muraleedharan had also reeled out these figures during a media briefing in Kerala on May 29.
Nonetheless, the details secured by Onmanorama, too, are sketchy. The 15th Finance Commission has prescribed 3 per cent of the Gross State Domestic Product (GSDP) as a state's annual borrowing limit. Kerala's, therefore, would be Rs 32,442 crore. But the Centre has now slashed a whopping Rs 12,000 crore from this to limit Kerala's OMB to Rs 20,521 crore.
As to why this was done, the Finance Ministry note in Onmanorama's possession is vague, even confusing. Here is one example. Last fiscal the Centre had said that the amount borrowed by Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala Social Security pensions Limited (KSSPL), called off-budget borrowings, will be reduced in four instalments of Rs 3578.20 crore from 2022-23 to 2026-27.
As per the note, only Rs 2500 crore will be reduced on this account this fiscal.
But this is only a minor complication. Here is a larger one.
The over-borrowing conundrum
A major reduction in the OMB has been made to adjust for what the note calls the "over-borrowing" of Kerala in the previous years. The note says that Rs 13,284 crore, by way of over-borrowing, has been subtracted from the OMB limit for 2023-24.
The Kerala finance department has no idea what constitutes "over-borrowing". "The Centre has never hurled such a charge before. So we are not sure what they mean by over-borrowing. Moreover, we have not been told that we have over-borrowed," the top finance department official said.
Also, seen in the light of the figures put out by the Comptroller and Auditor General, the charge of "over-borrowing" against Kerala stands on wobbly knees.
Take Kerala's fiscal deficit for the previous fiscal 2022-23. Balagopal had budgeted it to be 3.91 per cent of the GSDP. However, the accounted figures put out by the CAG shows that it had dramatically shrunk to 2.23 per cent.
This can be considered a marvel of fiscal consolidation as Kerala had planned to bring down the FD to 3 per cent only in 2025-26. Even a minor fall in FD is a sign that the state is meeting more of its expenditure needs from its own revenue than from borrowing.
In 2021-22 and 2020-21 fiscals, too, the FD had fallen from the budgeted levels, indicating gradual fall in borrowings. Given this reality, the Centre is obliged to throw more clarity on what it means by Kerala's "over-borrowings".
Confusion over public account
There is one more tricky area. The Finance Ministry note has estimated the borrowing from the Public Account as Rs 13,178 crore for the 2023-24 fiscal. The Public Account is where the state keeps its small savings and provident funds, reserve funds, deposits and remittances.
Since 2017, the Centre has been considering Kerala's Public Account as the state's borrowing, and has been reducing the amount in the Public Account from Kerala's OMB limit. Kerala had raised serious objections but the Centre had brushed them aside.
Kerala's finance department sources said the Public Account figure, as shown in the note with Onmanorama, is exaggerated. Kerala's budget figures reveal that there is only Rs 11,230 crore in Kerala's Public Account for 2022-23, nearly Rs 2000 crore less than what the Centre has estimated.
"But for us to dispute this, the Centre has to first give us the details. We cannot respond to figures given out to the media," the top official said.
(The story will be updated when the Union Finance Ministry responds to a set of follow-up queries sent by Onmanorama.)