THIRUVANANTHAPURAM: In a swift move, the Left Democratic Front (LDF) Government in Kerala has decided to move the Supreme Court challenging the Union Government’s decision to drastically cut the State’s net borrowing ceiling(NBC) on market borrowings for 2023-24.
This was one of the decisions taken at a high-level meeting chaired by Chief Minister Pinarayi Vijayan. The meeting also decided to seek the State’s borrowing plan and calculation table fixed by the Union Government. The meeting took place in the wake of the release of documents by Union Minister V Muralidharan. The Minister would have us believe that the cut in the state’s net borrowing ceiling for 2023-24 was to adjust for the off-budget borrowings already availed of by the State.
It may be mentioned that the 15th Finance/ Commission had fixed the NBC for States in 2023-24 at 3 per cent of the projected GSDP. Thus, Kerala’s projected NBC this year was Rs 32,442 crore. The state is also entitled to an additional borrowing ceiling of 0.50 per cent of the GSDP for meeting certain performance criteria in the power sector. However, the actual NBC for the state would be less than the projected NBC owing to the revised guidelines on Off-Budget Borrowings (OBBs) that came into effect last year. Accordingly, borrowings by special purpose vehicles like Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala Social Security Pension Limited (KSSPL) will be adjusted in the NBC.
Kerala’s Finance Minister K N Balagopal has accused the Union Minister of not sending the calculation table for the first nine months along with the consent letter for borrowings, as is the normal practice. The Minister also released, later, some data on Kerala’s borrowings keeping the State in the dark, Balagopal alleged. This, Balagopal added, is against the Constitution and principles of prudent administration.
What has shocked the Kerala Government is that the Union Minister conveyed that the State’s NBC would be Rs 15,390 crore for the first nine months, nearly Rs 7,500 crore less than the corresponding period last fiscal. Worse, the Union Government has not specified the reason for the ‘unkindest cut’ either. The sanction for the previous fiscal was Rs 22,900 crore. An additional Rs 900 crore was sanctioned for the last three months. The Centre had also allowed Kerala to borrow Rs 2000 crore for an ad hoc basis. Now, according to the Union Minister, this will be adjusted from Rs 15,390 crore!
This was an ugly surprise for the State, already under severe financial pressure. The State’s expectations this year were somewhere near Rs 24,000 crore. However, the sanction for the first nine months shows that Kerala will face a shortage of nearly Rs 8,000 crore compared to last year. Besides, the sanction for the last three months would be an amount below one fourth of the amount sanctioned for the first nine moths.
Kerala also found it intriguing that the first communication from the Union Government indicated a normal borrowing ceiling of Rs 32,442 crore. However, the second one, received on May 26 stated that the NBC in the first nine months was Rs 15, 390 crore! Equally intriguing was that unlike last year, the second letter did not have a calculation table showing details of OBBs or other liabilities which were adjusted from the NBC.
Kerala clearly sees a deliberate attempt on the part of the Union Government to hinder the State’s development ahead of the 2024 Lok Sabha elections. The State is also worried over the cessation of GST compensation and the low allocation of revenue deficit grants, which will certainly push the State into a crisis.
No wonder, Chief Minister Pinarayi Vijayan has condemned in no uncertain terms the Union Government’s ‘sadistic approach’ towards the State. Such actions by the Centre would only undermine the federal system of governance, the CM said. He said the decision will have a big adverse impact on the state as it does not have abundant wealth. The treasury is not in good shape either.
Moreover, the sources of revenue generation, such as GST, have been severely curtailed by the Union Government. The CM also referred to the many calamities the state had to suffer in the last few years. Even during that period, the Union Government denied assistance which was the State’s legitimate right. Such a hostile attitude towards the state government does not befit the Union Government, Vijayan pointed out. The LDF has also signalled its intent, besides resorting to legal action, to launch a political protest by mobilizing people against such ‘unkindest cuts’ aimed at financially crippling the state. (IPA Service)
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