Kerala financial crisis: Severe funds crunch leaves state’s projects in lurch

Even though the first half of the financial year is over, the government has been able to spend only 26% of the funds. Photo: Manorama Online

The financial crisis being faced by the state government has seriously affected the implementation of projects that have been mapped out by different departments, data revealed.

Even though the first half of the financial year is over, the government has been able to spend only 26% of the funds earmarked for the different projects announced in the budget. Of the budgeted amount of Rs 22,122 crore for state projects, only Rs 5,751 crore has been sanctioned till now and an amount of Rs 16,371 remains to be released.

As the central government has slashed the borrowing limit of the state, it will not be able to borrow more funds this year. In the coming days, this situation will throw the government into a deeper crisis in the implementation of projects.

Each passing month, the state government is able to garner just about sufficient funds for paying the salaries of government staff, pensions for retired employees, and meeting day-to-day expenditures through borrowings and tax revenue.

The government is in the process of obtaining a loan of Rs 2,000 crore from a consortium of banks as it is unable to pay the welfare pension even after imposing a surcharge of Rs 2 per litre of fuel. After the Centre made it clear that it would not raise the borrowing limit of the state, the last remaining hope has also faded. The government is maintaining a modicum of services by setting aside funds for unavoidable day-to-day expenses and by cutting back on project allocations.

The Finance Department is facing severe pressure from government contractors and various departments for the release of funds. The prohibition on passing bills of value above Rs 5 lakh is still in force. The Treasury Directorate has also issued oral instructions to the treasury branches not to honour bills below Rs 5 lakh unless they are of an emergency nature. The drastic cuts on project spending came after the government had to spend over Rs 10,000 crore in one go during the Onam season. The spending on projects floated by the Centre has been 28% till now.

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