Calculations arbitrary, unjust: Kerala urges union govt to review borrowing limit figures

Thiruvananthapuram: Kerala has again written to the union finance ministry, requesting a thorough review of the revised borrowing limit imposed on the state. State finance minister KN Balagopal will engage in discussions with union finance minister Nirmala Sitharaman regarding this urgent matter.

Recently, the union government notified Kerala that it can only borrow a maximum of Rs 20,521 crore from the public market this financial year, which falls significantly short of Kerala's anticipated requirement of Rs 28,550 crore. The government argues that the state is entitled for borrowing Rs 33,420 cr, or three per cent of state GDP.

Consequently, the state will need to explore alternative avenues to secure the necessary funds, necessitating a substantial increase in internal revenue. Given the limited options, cost-cutting measures will need to be implemented across various sectors. This fiscal year, numerous benefits, including DA, salary hikes, and pension reform arrears amounting to Rs 20,000 crore for employees and pensioners, will remain frozen.

Kerala's primary objection revolves around the reduction of its credit limit by Rs 13,177.61 crore, taking into account the funds held in the public account. The Accountant General's estimate last year pegged the amount in the public account at Rs 6,500 crore, which encompassed treasury deposits and provident funds.

However, rather than considering the actual figure in the public account, the union government has calculated an average over a three-year period. Kerala strongly asserts that this methodology is unacceptable. The figures certified by the Accountant General have been forwarded to the union finance ministry, and if these estimates are accepted, Kerala could secure an additional loan of approximately Rs 7,000 crore.

Legal Advice from KK Venugopal

Kerala is also seeking legal guidance to potentially approach the Supreme Court to challenge the decision to curtail borrowing. The government has instructed the Advocate General to consult with senior advocate and former Attorney General of India, KK Venugopal, for legal advice.

As per the Central Finance Commission's directive, Kerala is entitled to borrow three percent of the state's gross domestic product. However, due to various reductions imposed by the Center, the effective borrowing capacity has been limited to just two percent. Kerala is considering questioning the constitutionality of this move.

The union government’s approach of categorising loans obtained for the Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala Social Security Pension Limited (KSSPL) as extra-budgetary loans has led to a reduction in Kerala's credit limit. However, loans acquired by public sector institutions and agencies under the union government are not considered part of its debt. Kerala argues that this inconsistency represents a double standard.

During the previous government, legal advice was sought from constitutional expert Fali S Nariman, who suggested that legal recourse could be pursued. However, the government did not take further action at that time.