The state, once again, is staring at a major financial crisis after the Centre slashed Kerala’sborrowingcapacity by almost Rs 8,000 crore for the ongoing financial year.
With the Centre’s latest decision, the state can borrow only a maximum of Rs 15,390 crore for the first nine months of the ongoing financial year. Kerala has already borrowed Rs 2,000 crore for disbursing salaries and pensions, which forms the state’s biggest expenses. In effect, the state can borrow only up to Rs 13,390 crore for the stated period for meeting various expenses. Last year, the state was allowed to borrow Rs 23,000 crore.
The state has been maintaining that the Centre’s discriminatory approach towards Kerala has been smothering the state. In February this year, the state had received a communique from the Centre that its borrowing limit for the last quarter of the last financial year has been limited to Rs 937 crore, by cutting down the expected limit by Rs 2,700 crore. Though the norms say that the state can borrow up to a maximum of 3% of the GDP, the Centre had also included the Resources raised through KIIFB and the Kerala social security pension limited under the state’s borrowings, thereby reducing the limit of state’s further borrowing capacity.
As per article 293 (3) of the Constitution, the state cannot, without the Union Government‘s Consent, raise any loan if there is still any outstanding part of a loan which has been made to the state by the Centre or in respect of which a guarantee has been given by the Centre.