Kerala Finance Minister KN Balagopal said the state had been relying on its own sources of revenue to meet expenditures in recent years.
Published Oct 08, 2023 | 12:48 PM ⚊ Updated Oct 08, 2023 | 1:09 PM
KN Balagopal writes to Nirmala Sitaraman on Kerala's financial issues. (X)
On Saturday, 7 October, Kerala Finance Minister KN Balagopal wrote to Union Finance Minister Nirmala Sitaraman stating that the liquidity stress was now aggravated in Kerala specifically because of the cut in the annual borrowing ceiling for the financial years 2022-23 and 2023-24.
He sought the intervention of Nirmala Sitaraman on the issue.
He further said Kerala had been relying on its own sources of revenue for meeting the expenditure during recent years, unlike many other states.
Balagopal said the decision of the Union Government to include the borrowing of institutions like KIIFB (Kerala Infrastructure Investment Fund Board) and lower the annual borrowing limit of the state with retrospective effect was causing severe liquidity stress for Kerala.
“I write this letter to invite your kind attention to the issue of liquidity stress being faced by Kerala due to the reduction in annual borrowing limit (₹8,000 crore); cessation of GST compensation (loss of around ₹10,000 to 12,000 crore); reduction in Revenue Deficit grant during the current fiscal year (₹8,400 crore) compared to the previous year; and reduction in the inter se distribution from the divisible pool during the 15th finance commission (1.92 percent) compared to 10th finance commission (3.875 percent),” Balagopal said in the letter.
He added that Kerala was on a path of fiscal consolidation through augmentation of its own revenues and rationalisation of expenditure.
He said the state’s tax revenue grew at 22.4 percent (2021-22) and 23.4 percent (2022-23), and succeeded in limiting the fiscal deficit to well below 3 percent of GSDP in 2022-23, while reducing its revenue deficit as a proportion of GSDP to 0.9 percent.
“Our annual borrowing has also been kept within the statutorily permissible limits, adhering to the fiscal roadmap laid down by the Finance Commission. All these indicators evidence the commitment of the Government of Kerala to the goal of fiscal consolidation,” the minister said.
Balagopal added that the Ministry of Finance has been reducing ₹3,140.7 crore from the annual borrowing ceiling each year since 2022-23 on account of the off-budget borrowing done through KIFFB and KSSPL (Kerala Social Security Pension Company Limited) during 2021-22.
“The implementation of this new measure with retrospective effect has given a double shock to the state in terms of resource availability and its right to borrow from the open market,” he added.
A report of the Comptroller and Auditor General of India (CAG) on Kerala’s revenue sector for the financial year 2021-22 has found that the state’s revenue collection had decreased by 10 percent from what it was in 2017-18, while the receipts from the Centre had increased.
Responding to the report, the finance minister said on 15 September, that the government will decide on follow-up actions on the observations made by the Comptroller and Auditor General of India (CAG) in its recent report, after a detailed examination by Assembly committees and other departments.
“As per the CAG report, in the financial year that ended on 31 March 2022, the total revenue deficit of the state is ₹28,258.39 crore. This deficit has been carried over from departments like GST, Kerala State Electricity Board, registration, and police for several years. Previous audit reports have clearly mentioned it,” Balagopal said in a statement.
In May, post the cuts, 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.
Speaking to South First in May, he said, that the Union government has now set Kerala’s borrowing limit at ₹15,390 crore, much below what the state was expecting.
In an interview with PTI, on 29 September, Balagopal, criticised the BJP-led Union government, alleging it was denying Kerala its legitimate shares from various resources, causing a serious liquidity crunch.
(With PTI inputs)
