Borrowings: Kerala awaits Centre's nod; salary, pension distribution at stake

Thiruvananthapuram: The Kerala government has not yet received final approval from the Centre for market borrowings. If this approval does not come through on Friday, Kerala will be unable to proceed with the borrowings, potentially disrupting salary and pension distributions.

The borrowings are facilitated through the sale of bonds via the Reserve Bank of India (RBI), with bond auctions held on Tuesdays. Notifications for these auctions are released on the preceding Friday. The last Tuesday of this month falls on May 28th, necessitating the release of the notification today. Without the Centre's approval, the situation could become extremely challenging.

This delay at the start of the financial year has placed the state government in a difficult position. By early May, Kerala had already borrowed Rs 3,000 crores.

Typically, the state borrows funds before distributing salaries and pensions, using these loans to offset declining returns.

Currently, the state treasury is operating on an overdraft. Kerala is still awaiting Rs 1,500 crores from the Centre, which represents its share of collected taxes. This amount is expected to temporarily ease the overdraft situation.

The borrowing limit is set at 3 percent of the State Domestic Product, amounting to Rs 37,512 crores for this year. After accounting for funds utilised by the Kerala Infrastructure Investment Fund Board (KIIFB) and expenditures related to welfare pensions and provident funds, the Centre must specify how much additional money the state can borrow.

Kerala is still awaiting approval to secure more loans. Last year, approval was granted only at the last moment.