Grave financial crisis awaits Kerala in Q4 FY 2022-23

Going by the borrowing limit, the government could take Rs 52 crore as loan. Photo: Manorama

Thiruvananthapuram: Even as the state government is looking at means to raise Rs 30,000 crore to meet the expenses towards the end of the current financial year, Rs 10,000 crore expected from the central government is not likely to come.

With Union Finance Minister Nirmala Sitaraman categorically stating that Kerala's borrowing limit would not be increased, the state government is looking at alternatives to raise funds.

Additionally, the state would be curtailing funds by 40 per cent earmarked for various projects. This would put pressure on various departments. The government is also trying to find funds for disbursing two months' welfare pensions before Christmas.

Going by the borrowing limit, the government could take Rs 52 crore as loan. However, considering the state's financial situation, the Centre allowed it to borrow Rs 3,800 crore in advance. This amount was set aside for borrowing between January and March next year.

The state government borrowed Rs 2,000 crore from the January-March funds last week, and it would soon avail the remaining amount to provide welfare pensions and meet other expenses. The January-March period is normally expensive and according to government estimates, the state would require at least Rs 30,000 crore during the last quarter of the financial year.

The central government had set three per cent of the total Gross State Domestic Product (GSDP) as the state's borrowing limit. The state expected to borrow Rs 32,442 crore — three per cent of the GSDP. However, the Centre included the borrowings by the Kerala Infrastructure Investment Fund Board (KIIFB), Pension Company, and other agencies, too, in the state's borrowing limit, which substantially slashed the loan funds,

Kerala was expecting that the Centre would accept the chief minister's request to allow the state to borrow one per cent more of the GSDP.

Possible alternatives

  • The state would ask the Centre to allow borrowing of an amount equal to what KIIFB had repaid.
  • Take maximum advance from KSFE, Beverages Corporation
  • Temporarily withhold a part of government employees' salary. This would require legislation.
  • Push financial year-end expenses to the next fiscal year.
  • Hold those projects that haven't been started till the next fiscal.
  • Raise funds by forming a consortium of cooperative banks.
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