Analysis | Why Balagopal should also take responsibility for Kerala's liquidity crunch

Finance Minister K N Balagopal constantly grumbles about the vindictive manner in which the BJP-led Centre goes about restricting Kerala's access to development funds. But how has Balagopal fared in utilising the money at his command?

Quite recklessly, according to the latest findings of the Comptroller and Auditor General (CAG). In the 2023-24 fiscal, the Kerala FM’s random budget allocations that deviated wildly from the realistic flow of revenue and expenditure had frozen nearly ₹7250 crore that could have otherwise been utilised for the state's growth and welfare.

Balagopal's imprudent methods were evident in how he sought supplementary grants for schemes and projects and also in the way he re-appropriated budgetary funds from one project to another.

The finance minister sought additional funds (above the budgetary allocation) of ₹523 crore from the Assembly as 'supplementary grants' for 16 items of expenditure and ended up not spending even a rupee. Fact is, in these 16 cases, not even the budget allocation was fully utilised. The supplementary grants were "wholly unnecessary".

Take for instance, the National Health Mission. The budgetary allocation was ₹913 crore in 2023-24. The finance minister sought an additional ₹75 crore as a supplementary grant in February 2024, the last quarter of the fiscal. The utilisation at the end of the fiscal was ₹666.86 crore, ₹246 crore less than even the original allocation. Left unspent was ₹321.14 crore.

Here is another one. Balagopal allocated ₹13.80 crore in his 2023-24 budget for the upgradation of RCC as State Cancer Institute. In February 2024, Balagopal sought and secured an additional ₹12.93 crore. But the eventual spending was only ₹12.93 crore, less than even the original allocation of ₹13.80 crore. Nearly ₹14 crore was left unspent.

There was also "excessive supplementary grants" in 11 cases, totalling ₹4755.71 crore. If in the earlier 16 cases additional grants were unnecessary, in these 11 cases, Balagopal asked for more additional funds than was necessary.   

Take for instance Jal Jeevan Mission. The budget allocation was ₹500 crore. In the last quarter of the fiscal (February 2024), Balagopal secured ₹1362 crore as supplementary grant taking the total allocation for Jal Jeevan Mission to ₹1862.68 crore. The Water Resources Department could spend only ₹1207.15 crore. ₹655.52 crore was left idle.

Supplementary Nutrition Programme for Children is another example. The budget allocation was ₹150 crore. Balagopal wanted an extra ₹183.40 crore, taking the total allocation to ₹333.40 crore. The final utilisation was only ₹293.71 crore, leaving nearly ₹40 crore unspent.

Top sources in the finance department laid the blame squarely on the Centre. "Kerala should have been given the consent to borrow ₹13,608 crore in January 2024 but the Centre gave its approval only in March. This caused a liquidity crunch and left the state with no choice but to curtail expenditure," the official said.

This was a weak defence because the supplementary demands for ₹40,776 crore were placed before the Assembly only in February 24, 2024, when the end of the fiscal was just a month and a bit away. Balagopal knew that such a huge amount could not be spent in such a short time and yet he sought the legislature's approval for the additional funds.   

The unspent amount in all these 27 items totalled nearly ₹5280 crore. The CAG noted that these locked-up funds could have been utilised by departments that were in need of money.

There was faulty re-appropriation, too. Unnecessary amounts were re-appropriated or transferred from one project to another. Integrated Child Development Service (ICDS) is an example. ₹485.80 crore was the original allocation. Balagopal transferred to this project ₹351.86 crore from other 'social security and welfare schemes'. But the final ICDS spending was ₹464.18 crore, less than the original allocation of ₹485.80 crore. Other social security schemes were hit and the ICDS did not benefit either by this re-appropriation.

Such thoughtless re-appropriation under 16 heads had left idle ₹1440.69 crore.

On the one hand, Balagopal cribs about the Centre limiting the flow of money to the state and on the other blocks a substantial amount of nearly ₹7250 crore (₹523 crore +₹5280 crore + ₹1440.69 crore) from getting utilised for the state's development.