Relief for states, including Kerala, as Centre defers decision on recording off-budget borrowings

Thiruvananthapuram: The Union Government has declined to implement a 16th Finance Commission recommendation that sought to include off-budget borrowings, such as those by the Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala Social Security Pension Limited (KSSPL), into the formal state budget. The Central Government’s current stance in Parliament is to examine the recommendation further before making a final decision. The Finance Commission had suggested that these types of borrowings pose a threat to the financial stability of states.

Currently, the Centre deducts a portion of these off-budget borrowings from the states' annual borrowing limits. The Centre's decision not to immediately implement the recommendation is seen as a temporary relief for states like Kerala.

If the Commission's recommendation were fully implemented, all borrowings, including those by public sector undertakings, would have to be accounted for in the annual budget, which would significantly exceed Kerala's permissible borrowing limit.

Central Government, NDA-led govts also borrow

The Central Government also takes similar borrowings. While the Centre previously included these in its budget, it stopped this practice in 2022–23, the Finance Commission noted.

According to data up to March 31, 2023, NDA-led Andhra Pradesh leads in off-budget borrowings not included in the budget, totalling ₹61,566 crore. Uttar Pradesh follows with ₹3,488 crore in similar borrowings.