Kerala in a fix after Union government makes unexpected cuts in borrowing limits; welfare-pension beneficiaries suffer

The state's Finance Minister KN Balagopal accuses the Union government of discrimination, holding back funds.

ByK A Shaji

Published May 27, 2023 | 1:00 PMUpdatedMay 27, 2023 | 1:00 PM

Kerala Supreme Court: Kerala's Finance Minister K N Balagopal criticised the Budget, saying that the long-pending demands of the southern state were completely ignored. (South First)

Kerala’s Finance Minister KN Balagopal is angry. The Union government has halved the state’s borrowing limit, which would affect the distribution of several social security pensions.

The Centre’s move would hit Kerala hard with unpaid contractors, who had taken up various jobs on behalf of the state’s Public Works Department, refusing to take up pre-monsoon works and even the Police Department vehicles going dry without fuel.

Faced with a financial crunch, the state government is going slow in implementing projects requiring huge expenses.

It even shelved the launching of welfare measures marking the second anniversary of the Pinarayi Vijayan-led LDF government. Social security pensions, including those for widows and aged, ailing people, have been put on hold since the beginning of this fiscal year.

The Centre is enforcing the cut on borrowing while the government plans to avail loans and release the pending amounts, at least partially.

Finance Minister Balagopal told South First that the Union government has now set Kerala’s borrowing limit at ₹15,390 crore, much below what the state was expecting.

According to him, the state can borrow at least ₹32,442 crore —  three percent of the GSDP —  but the Union government implemented the cut without citing any reasons.

Also read: Kerala hands over ‘LIFE Mission’ houses to homeless in 4 districts

State’s request ignored

The state government had requested the Centre to fix the borrowing limit at ₹22,000 crore. Balagopal said the Centre was attempting to strangle the state financially, and in the process, the less privileged in the state were getting targeted.

He felt the Centre has made it a practice to deny or reduce grants and loans required by Kerala — a challenge to the people of the state.

The ultimate aim of the Centre is politics, and it wants to halt the developmental and welfare activities in Kerala, which has become a model for the entire nation, he said.

Balagopal called for a joint effort by all political parties in Kerala to secure its legitimate dues. The state government urgently requires at least ₹20,000 crore to clear the arrears in top priority areas.

Meanwhile, BJP state leaders hinted that the Centre started regulating the open-market borrowings after the state government excluded the borrowings by the Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala State Social Security Pension Ltd (KSSPL) from the state’s direct debt.

Related: Centre’s policies financially choking state: Kerala Finance Minister

The state government used both agencies to avail loans indiscriminately and beyond the permitted levels, the BJP leaders alleged.

“There is nothing strange in the decision of the Union government. KIIFB and KSSPL must not act as independent entities. The Centre wanted both of them to be accountable and adjust their borrowings within the limits set for Kerala. No politics is involved in it,” BJP state president K Surendran told South First.

The arrears in social security pensions would come to around ₹600 crore, and the state government is bound to clear them before the harvest festival, Onam. Officials in the Finance Department said the Union government’s contributions to welfare pensions have been meagre.

Still, even the Centre’s contribution has been pending for more than two years. The state has been availing loans and distributing the pension on time despite the delay on the Union government’s part in contributing to the pension schemes.

Since December 2020, the Centre has not released its contributions to the welfare pension schemes in Kerala.

Also read: Over ₹7,100 cr revenue arrears to be recovered, CAG tells Kerala govt

Beneficiaries suffer

Among the 50,54,809 eligible beneficiaries of various welfare pensions, 6,88,239 are eligible to get contributions from the Centre.

The Centre contributes to the Indira Gandhi National Old Age Pension Scheme, the Indira Gandhi National Widow Pension Scheme, and the Indira Gandhi National Disability Pension Scheme, etc. In most pension schemes, Kerala gives an average of ₹1,600 per person to which the Centre contributes between ₹200 and ₹500. The remaining is the state’s contribution.

While the state government contributes ₹1,100 to the pension paid to those with 80 percent disability and aged below 80, the Centre gives just ₹500. For those with 80 percent disability and aged above 80, the state solely meets the expenses.

Regarding pension for widows aged between 40 and 80 years and those above 80 years, the state government contributes ₹1,300 and ₹1,100, respectively. The Centre grants ₹300 and ₹500.

Related: ‘Centre’s fiscal policies are damaging nation’s federal structure’

‘Centre to blame’

Balagopal said the government’s promise to disburse the welfare pension every month could not be honoured because of the financial crisis created by the Centre.

He also said there would be delays in releasing salaries and perks to state employees if the crisis continues without the Centre initiating mitigatory steps.

The finance minister said the state government, on its part, managed to improve the financial situation by bringing down expenditures to the barest minimum. He said the Centre lowering the state’s borrowing limits is not a healthy practice.

Besides these liabilities, the state has to immediately release ₹2,800 crore arrears to service pensioners due to the revision of pension and ₹1,400 crore as Dearness Allowance.

Balagopal had stated in the Assembly last month that these arrears would be disbursed in this financial year when the fiscal situation improves.

In addition, the government has to pay the arrears resulting from the pay revision of government employees and leave surrender, and the salary revision for college teachers as per the UGC scale.

The universities in Kerala have also been facing a financial crunch after the government held back grants for the past five months.

While human-animal conflicts escalate in the state, compensations announced in June 2021 are still pending. The Forest Department is feeling the heat with the affected people protesting against the delay in distributing the compensation.