Thiruvananthapuram: As concerns over the state's fiscal stability deepen, the government has launched a comprehensive reassessment of Kerala’s financial health, while also cautioning that financial pressures are likely to intensify in the days ahead.

An assessment by Chief Minister VD Satheesan following the first round of discussions with economic experts, flagged a sharp squeeze on the state’s revenues, driven by rising fuel prices and the Centre’s tightening fiscal stance. It was also observed that, unlike the Manmohan Singh government’s approach of stimulating demand by channeling more money into the economy to boost consumption during times of crisis, the austerity policy suggested by the Centre may, in effect, intensify the financial strain.

Based on this assessment, the Chief Minister has constituted a special committee to prepare a white paper outlining the current situation as well as future challenges. The report, slated to be submitted within this month, will serve as the foundational document for the state budget to be presented next month. The committee is also considering dropping the term `white paper' and instead titling the document `Financial Health of Kerala.' A detailed review of KIIFB will also be part of the exercise.

A report submitted by the Public Expenditure Review Committee during the second Pinarayi government had estimated that the state was losing between ₹20,000 crore and ₹25,000 crore in tax revenue due to shortcomings in GST implementation. However, the government  refused to accept these findings at the time. The inclusion of D Narayana, who prepared that report, in the expert panel tasked with drafting the white paper aims at exploring possible GST reforms.

Meanwhile, the government is also weighing the appointment of K M Chandrasekhar, who heads the committee, as Vice-Chairman of the Planning Board. Chandrasekhar had earlier served in the post during the Oommen Chandy government.

Key Challenges

• Ensuring timely repayment of KIIFB loans and exploring new avenues for revenue generation.
• The need for GST reforms.
• Effective intervention in centrally sponsored schemes
• While central tax devolution is projected to rise by ₹10,000 crore, the absence of the Revenue Deficit Grant this year is expected to further aggravate the crisis.
• Even if new ways are identified to increase revenue, a significant surge in income is unlikely.

Committee

• Chairman: K M Chandrasekhar (Former Cabinet Secretary and former Vice-Chairman of the Planning Board)
• Convener: K R Jyothilal (Additional Chief Secretary, Finance)
• Members: D Narayana (Former Director, Gulati Institute), C Veeramani (Director, CDS)
  

Welfare pension disbursal from 25th
Meanwhile, the Chief Minister has informed that the distribution of this month’s welfare pension of ₹2,000 will begin on the 25th. An amount of ₹1,070 crore has been allocated for the purpose.