Borrowing limit: Kerala’s financial crisis looms as Centre grants only Rs 8,000 cr; seeks review

Thiruvananthapuram: Despite Kerala arguing that it is eligible to borrow an additional Rs 17,600 crore by the end of the ongoing financial year, the Union government has approved only Rs 8,000 crore. Kerala will once again send a letter requesting a review of this decision.

The letter confirming the Rs 8,000 crore allocation was received recently, with Rs 2,500 crore of this amount being issued as bonds. The sale of bonds will take place on Tuesday. If the Centre does not approve additional borrowing, the state will face a severe financial crisis. Expenditure will need to be further reduced by March, the end of the financial year.

Already, planned expenditures have been cut by up to 50%. The government will also be unable to fulfil promises made regarding benefits for employees, among other commitments.

Kerala had requested that the Centre allow the full Rs 17,600 crore, which includes an additional loan of Rs 6,250 crore for reforms in the power sector, to cover the period from January to March. The state argued that it is eligible for this amount based on adjustments to public accounts, including various Treasury investments and internal revenue, such as provident fund deposits.

However, the Centre’s letter granting only Rs 8,000 crore has not provided any justification for the reduced amount. Kerala will seek an explanation regarding this decision.