Govt to SC: Kerala gets due share from Centre, mishandling to blame for crunch

Painting a grim picture of the state’s revenue receipts and expenditure, the Centre said that “to circumvent the borrowing limits, Kerala has resorted to off-budget borrowing of Rs 42,285 crore from 2016-17 to 2021-22 through the Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala Social Security Pension Limited (KSSPL)” which “have no revenue sources of their own”.

“Since… the borrowings are to be repaid not from their revenue resources but from funds transferred from the Consolidated Fund of the State, CAG (Comptroller and Auditor General) termed it as an attempt to bypass targets set in Kerala Fiscal Responsibility and Budget Management Act and Net Borrowing Ceiling prescribed by the Centre”.

The CAG, said the Centre, has observed that “these off-budget borrowing will have an impact of increasing the liabilities of the state government, leading to a debt trap over a period of time” and that “such off-budget borrowings by SOEs amount to borrowing by the state”.

The AG pointed out that “Kerala’s financial health and debt situation has attracted adverse observations from successive Finance Commissions as well as the CAG. The RBI has also categorised Kerala among the five highly stressed states requiring urgent corrective measures”.

He added that “a study on State Finances of Kerala conducted by the Indian Institute of Management, Kozhikode in 2017 also pointed towards poor public finance management in the state”.

The note added that “despite the devolution of substantial resources from Central taxes and duties, highest share of post devolution Revenue Deficit Grant, financial support extended by the Union government over and above the recommendations of the Finance Commission and substantial transfer of resources to the State government under the Centrally Sponsored Schemes, any financial stress that the Government of Kerala is facing is purely due to its own financial mismanagement”.