Thiruvananthapuram: The Kerala government has urged the Centre to provide a special financial support package, stating the state is facing severe fiscal pressure due to mid-year GST rationalisation, reciprocal tariff actions by the United States, shrinking central assistance, and a declining share in the divisible pool.

In his pre-Union Budget submission, State Finance Minister K N Balagopal warned that these overlapping economic shocks, including reduced Centrally Sponsored Scheme (CSS) support and unexpected cuts in borrowing limits, are weakening Kerala’s revenue base, growth outlook, and long-term fiscal sustainability.

Balagopal said losses amounting to thousands of crores have hit Kerala’s capacity to sustain essential services, welfare programmes, and infrastructure projects. He sought a special fiscal correction package to bridge a resource gap of over ₹21,000 crore created by the current borrowing constraints.

He noted that the shortfall stems from a ₹17,000 crore reduction in borrowing limits, compounded by an estimated loss of ₹4,250 crore arising from deviations in Gross State Domestic Product (GSDP) assessment methods from the 15th Finance Commission’s recommendations.

The minister stressed that borrowing restrictions imposed by the Centre have triggered a financial crisis and requested an additional borrowing window of 0.5 per cent of GSDP exclusively for capital expenditure, to accelerate infrastructure development without affecting welfare spending.

He also proposed earmarking 25 per cent of the Union government’s 50-year interest-free capital expenditure loans for an Asset Renewal Fund to upgrade ageing infrastructure in developed states like Kerala.

Referring to the impact of GST rationalisation, Balagopal demanded a revenue protection framework to prevent state-wise financial shocks and rule-based compensation through the Compensation Cess mechanism.

He further urged the Union government to restore the earlier rural employment guarantee structure, warning that under the new VB–G RAM G scheme, Kerala would be forced to bear 40 per cent of programme costs, creating an additional financial burden running into thousands of crores.

He said this change risks undermining the original objective of guaranteeing rural employment and protecting millions of livelihoods.

The minister also requested that central assistance under CSS be increased from 60 per cent to 75 per cent and highlighted the potential of Vizhinjam International Seaport to emerge as a major national import-export hub. He sought support for rail connectivity, a port-based industrial corridor, a green hydrogen hub, and a seafood processing ecosystem.

Calling for financial backing for paddy procurement reforms and Kerala’s plantation sector, particularly rubber, Balagopal urged the Centre to increase rubber support prices from ₹200 to ₹250 per kg, with the Union government absorbing the additional cost.

He reiterated Kerala’s long-standing demands, including establishing an AIIMS in the state, expediting the Sabari Rail project, and providing rescue packages for traditional industries such as cashew, coir, and handloom.

Raising concerns over increasing human-animal conflict, he sought a ₹1,000 crore dedicated allocation to address rising fatalities and crop losses affecting livelihoods.

Given Kerala’s ageing population, he requested a separate Union Budget allocation for expanded healthcare infrastructure, specialised hospitalisation, social support mechanisms, and essential welfare schemes.

Expressing optimism, Balagopal said Kerala expects the upcoming Union Budget and the 16th Finance Commission report to address the state’s pressing fiscal needs and ensure equitable resource allocation.

PTI