Instead of aid, Kerala has received only an interest-free loan of Rs529.50 crore that can be repaid in 50 years.
Published Feb 19, 2025 | 11:23 AM ⚊ Updated Feb 19, 2025 | 11:23 AM
Modi's visit to Kerala during the Wayanad landslide
Synopsis: The state earlier requested a special package of Rs2000 crore; this loan also comes with the rider that it be used to implement 16 projects for rehabilitation of victims, there is also confusion about a March 31, 2025 deadline for fund utilisation.
In the aftermath of the devastating Wayanad landslide that claimed 254 lives, injured hundreds, and left 44 people untraceable, hope came with a solemn promise: Prime Minister Narendra Modi assured Kerala of the Centre’s unwavering support to rebuild what was lost.
However, as the state grapples with the monumental task of restoring Wayanad, that promise falls short. Kerala requested a financial package of ₹2000 crore to reconstruct the ravaged region, reflecting the scale of destruction.
Instead, the Centre offered an interest-free, long-term loan of ₹529.5 crore, a fraction of what was demanded.
What is more, the loan comes with an ‘impractical’ deadline – funds must be utilised by March 31, 2025.
The 2024-2025 allocations from the National Disaster Response Force and State Disaster Response Force reveal a worrying trend – diminished support for the southern states, amplifying concerns of financial neglect and regional imbalance.
The Centre, in a letter received by Kerala’s additional chief secretary (finance), Dr. A. Jayathilak, on February 11, stated that funds under the capital investment loan must go directly to beneficiaries, with no diversion allowed.
Kerala has just 45 days to utilise the loan, despite the Centre approving payments only for completed projects with utilisation certificates.
Among the 16 listed projects are plans for a township for landslide victims and the construction of public roads and buildings.
Finance Minister K.N Balagopal said the State government will ask the Centre for more time to use the ₹529.5 crore loan meant for Wayanad rehabilitation.
The Union government had set a deadline of March 31, which the State called a “huge practical problem.” The Minister said it is normal to request an extension in such cases and noted that the short timeline of one and a half months has drawn widespread criticism.
A high-level meeting chaired by Chief Minister Pinarayi Vijayan on Tuesday addressed the concerns over the impractical time limits imposed on Wayanad’s rehabilitation and reconstruction efforts.
The meeting decided to proceed without any technical or time-related constraints, ensuring that ₹529.50 crore allocated for the project can be utilised effectively.
The funds will be used for 16 essential infrastructure projects in the landslide-affected areas of Mundakkai and Chooralmala, with the tendering process set to begin soon.
A senior state Finance Department official clarified to South First: “The 31 March deadline applies only to planning-related projects, not to the special financial assistance scheme, which provides an interest-free loan. There are no specific regulations governing the conditions of this scheme, and concerns about the 45-day limit disrupting the project timeline have been addressed.”
Departments such as Public Works, Irrigation, Energy, and the Water Authority will be instructed to start work immediately.
Additionally, the consultancy firm KIFCON will be tasked with providing further clarity on housing-related expenditures.
People living in the “No-Go Zone,” identified in the John Mathai Committee’s report, will not be allowed to resettle in the same area. Instead, they will receive a compensation of ₹15 lakh.
The meeting was attended by Minister K. Rajan, Chief Secretary Sharada Muraleedharan, and senior officials from the Chief Minister’s Office, as well as from the Revenue and Disaster Management Departments.
Dr. Godvin SK, Treasurer of the Kerala Economic Association, founding member, and Secretary of the Indian Health Economics and Policy Association (IHEPA), described the current scenario as akin to having your hands tied while being asked to eat the food in front of you.
He told South First, “The fundamental problem is that disaster-related assistance should be provided as aid, not as a loan. Even if it is interest-free, it is still treated as a loan, which impacts the state’s fiscal burden in the long run. This should have been sanctioned much earlier. The other concern is that it may affect the eligibility criteria for borrowing funds in the future.
According to the FRBM (Fiscal Responsibility and Budget Management) Act of 2003, a state’s total borrowing in a year should not exceed 3.5 percent of its domestic product. We still don’t know whether this loan is included in that limit. If it is, this will further strain Kerala’s finances and lead to a deeper crisis.
At the very least, we deserve an exemption from this. It’s more of a political decision; there is no economic logic behind it, and it doesn’t deserve any justification. It could be justified if we received aid first, and then additional expenses could be covered by a loan.
Each state has different needs. For example, Bihar needs more funds for primary education, while Kerala requires more for higher education. Southern states, with their higher infrastructure quality and quality of life, need more assistance compared to the northern states. Having a higher quality of life should not mean that we receive less support from the government.”
EM Thomas, a distinguished author, educationalist, and former General Secretary of the Kerala Economic Association, also expressed dissatisfaction that it is a loan.
“At least 50 percent should have been given as aid. We are facing this crisis largely due to political reasons. If the same government were in power at both the Centre and state, we would have received more fair treatment,” he told South First.
Dr. Mary George, an economist and former member of the Kerala Public Expenditure Review Committee, offered a different perspective. While she condemns the loan, she highlighted a significant concern – Kerala’s habit of diverting funds meant for one purpose to another.
She stated that, in December, the High Court asked the Kerala government to provide a statement on the details of the funds available in the State Disaster Response Fund (SDRF) and how they had been utilised.
Additionally, the Kerala HC asked the Central government to consider relaxing the norms for SDRF/NDRF so that the state government could be relieved of the ₹180 crore outstanding debt, enabling it to use the funds for Wayanad’s rehabilitation efforts, she told South First.
The latest figures on the allocation and release of funds from the SDRF and the NDRF for 2024-25 reveal a striking disparity that raises critical questions.
Kerala has been allocated a total of ₹388 crore from the SDRF, with ₹291.20 crore coming from the central share and ₹96.80 crore from the state share.
So far, ₹145 crore has been released as the first installment, with the same amount expected in the second.
Yet, what stands out is the absence of any additional financial support from the NDRF for natural disasters or modernisation of fire services.
In contrast, neighbouring Tamil Nadu — another disaster-prone state — has received a significantly higher SDRF allocation of ₹1260 crore and has also secured ₹276.10 crore from the NDRF for natural disasters and ₹83.98 crore for fire services. The allocation, even in terms of a comparison of population (Kerala 3.3 crore in 2011 census, and Tamil Nadu 7.2 crore) appears disproportionate.
Karnataka, meanwhile, stands out with a staggering ₹3454.22 crore from the NDRF. (Population: 6.1 crore in 2011 census)
Even Telangana and Andhra Pradesh, with smaller or comparable SDRF shares, managed to draw NDRF support for either natural disasters or fire service modernisation.
For Kerala, a state that has faced recurring floods, landslides, and the looming threat of coastal erosion, this gap is more than just a financial shortfall; it speaks to a larger issue of overlooked vulnerabilities.
The absence of NDRF support could suggest delays in claims processing, a lack of proactive engagement with the Centre, or even systemic hurdles in securing post-disaster funds.
LDF leaders, including Thomas Isaac and K. Rajan, have strongly criticised the Centre for delays in providing timely disaster relief for the Wayanad landslide, calling it neglect and an intentional move to burden states with long-term loans.
They highlighted the lack of urgency in processing aid and the missed opportunity for international support due to the delayed response.
Kerala’s requests for additional assistance, including debt waivers and recognition of the disaster’s severity, have yet to receive a clear response from the Centre.
The Leader of Opposition in the Assembly, V.D. Satheesan, also criticised the Centre’s decision, calling the condition to utilise the loan amount by 31 March “impractical.”
He argued that by offering a 50-year interest-free loan for 16 projects, with a strict deadline of 31 March for utilisation, the Central government was “suffocating Kerala while pretending to assist it.”
(Rosamma Thomas)
