Unless the Centre bends backwards pronto to let Kerala borrow Rs 3,000 crore more than it is allowed, the state would be in a complete financial mess, its new Finance Minister TM Thomas Isaac told The Indian Express today.Isaac is now in New Delhi, talking to Montek Singh Ahluwalia and senior officials at the Finance Ministry. ‘‘I really don’t think Kerala has a way out other than the Centre easing up on our borrowable limits. As things stand, the situation couldn’t be any worse, it is scary. The Centre must use its discretion to make an exception,’’ Isaac said over phone from Delhi. Isaac says the state, which the Centre has already declared debt-prone and stopped from taking more foreign loans, would mobilise the money only from internal sources. Anyway, foreign funding will be a big no-o for Isaac. The minister, who had steered Kerala’s ambitious decentralised planning programme during the last Left government, had then come in for flak from VS Achuthanandan for taking foreign funds for the initiative.So bad is the picture Isaac paints that he says the state has no option but to borrow much more than the allowed ceiling even to stay afloat. In the present scenario, the state may need to cut down on its annual plan expenditure by as much as 70 per cent, or go for a plan holiday, he warns. Isaac does some revealing number crunching: The UDF government’s budget projections said the state could borrow Rs 7,246 crore, but the Centre, considering Kerala’s messy finances, had curtailed this to Rs 4,672 crore. Kerala’s debt had billowed to 41 per cent of its domestic income from 34 per cent earlier. Isaac blamed most of this on some initiatives kicked off by the UDF government. For instance, the World Bank-assisted state road development project, originally pegged at Rs 1,100 crore, is now expected to require at least Rs 3,000 for commissioning. The government already owes construction contractors a whopping Rs 600 crore. Though the Oommen Chandy government, at its fag end, had earmarked Rs 1,135 crore for its pay reforms package, the state needs at least Rs 900 crore more to implement it, Isaac maintains.The other backup measures Isaac is trying to push with the Centre include a review of VAT, which he says has done little good to the state finances, splitting of service tax with the state and a nod to hike luxury tax. But Isaac also says there are many warts that need to be tackled by the state itself: Tax collection has been so bad in Kerala that the state doesn’t get even one-third of the revenue it should be getting now. ‘‘I have nothing to hide. But things have come to a point that we can’t pull on unless the Centre agrees to let us borrow more and get over the current crisis,’’ he said. -rajeev.pi@expressindia.com
