Centre Cuts 5,944 Crore From Kerala’s Borrowing Limit

Thiruvananthapuram: Kerala’s finances have come under further strain as the Union government has imposed fresh cuts on the state’s borrowing limit, even as the state continues with development and welfare programmes. The Centre has reduced Kerala’s borrowing ceiling by an additional 5,944 crore. The state has also been required to find an extra 2,000 crore for the employment guarantee scheme.

The reduction comes at a critical stage, as the state finance department has begun discussions to prepare a new budget. The cut is set to impact revenues in the current financial year. Even under these constraints, the state government is continuing with welfare initiatives, including higher welfare pensions, women’s security pensions and financial assistance for youth under the ‘Connect to Work’ scheme.

To meet immediate commitments, the government needs 3,135 crore to pay welfare pensions to 63 lakh beneficiaries over the next three months. Around 20,000 crore is required to clear pending bills, including those of contractors. Another 15,000 crore is needed to meet salary and pension payments.

Kerala had been allowed to borrow 12,516 crore in the final quarter of the financial year. Of this amount, 5,944 crore has now been cut. The Centre has cited additional borrowings through KIIFB and the pension company as the reason for the reduction. The borrowing space available for the remainder of the financial year is now limited to 6,572 crore.

The state government has said it is examining measures to address the Centre’s approach affecting development and welfare programmes.

Centre’s Double Standards

The Union government raises funds for the National Highways Authority of India (NHAI) through borrowings outside the budget. These loans are kept outside the Centre’s borrowing limits. Borrowings by KIIFB are also undertaken in line with Reserve Bank of India norms, following a similar structure.

In Kerala’s case, however, such borrowings have been included within the state’s borrowing limit. This has led to a cut of 4,730 crore in the current financial year alone.