Thiruvananthapuram: The financial crisis in the state is so severe that it is difficult even for daily expenses. Balagopal told a cabinet meeting on Friday. This is due to the delay in getting the Centre’s approval to borrow. But late on Friday, the Center allowed Kerala to borrow Rs 5,000 crore. This is a temporary arrangement only. This permission is as a temporary relief until a decision is taken on the disputes raised by the Center regarding Kerala’s debt.
Minister KN Krishnan said the state would assess the demand and decide how much to borrow this month. Balagopal told Mathrubhumi. The loan will be raised through bonds issued by the Reserve Bank.
What is the problem?
Kerala’s debt this year is Rs 32,425 crore. However, the Center had not yet given permission for this year’s loan, citing the fact that Kerala had borrowed more than it had been allowed through institutions including Kifbi last year.
The state government decided to borrow Rs 4,000 crore but did not do so due to lack of central approval. This led to a severe financial crisis. Borrowing is also prohibited when the treasury is restricted to changing bills above Rs 25 lakh due to poor financial condition.
The delay in approving the loan was due to the Centre’s new requirement that loans taken by public sector undertakings and KIFB be added to the state’s debt. The central government has said that the loans taken by these institutions last year will be defrauded and the rest will be allowed to be borrowed. The state argued that this was unacceptable.
The Center will announce the amount of loan to the State only after the final approval of the loan account. Five thousand crore has now been allowed to be taken to avoid the crisis till then.
If the center does not grant a waiver
The government’s preliminary estimate is that Kerala’s debt will be reduced by about Rs 12,000 crore this year if the Center stands firm on increasing the debt of PSUs and KIFB to the state.
The priority of the projects that can be implemented with the remaining loan will have to be decided. Salary, pension and interest expenses cannot be deferred. It will affect the projects.
Public sector companies will also have to reduce borrowing. This will seriously affect the total revenue of the state and the public sector undertakings. Kifby borrows out of budget because it has no money for development. If that happened then Kifby would be in for a rude awakening. The state has decided to wait to know the final position of the Center.