KSRTC incurs Rs 300 cr interest on loan taken to pay pension

Thiruvananthapuram: The Kerala State Road Transport Corporation (KSRTC) has incurred an additional Rs 300 crore in interest on loans taken from cooperative banks to pay pensions.

Since February 2018, KSRTC has relied on cooperative bank loans to meet pension obligations. These loans are disbursed by a consortium of cooperative banks, with the understanding that the government will repay them with interest. The agreement stipulates that the loan must be repaid within three months. Initially, the interest rate was set at 10 percent, though it has since been reduced.

Each month, Rs 80 crore is required to pay pensions. When this amount is repaid after three months, KSRTC has to pay atleast Rs 4 crore as interest. This interest is also covered by government allocations to KSRTC. If the government were to transfer the pension funds on time, these interest expenses could be avoided. However, the government is currently unable to assume the pension liability of public sector undertakings, necessitating the loan arrangement.

A similar approach is being used for salary payments. KSRTC has decided to borrow Rs 100 crore from Kerala Bank at an interest rate of 10 percent. The loan will be repaid upon receipt of government assistance, but interest will accrue during this period. Even when an overdraft of Rs 50 crore was taken from the State Bank of India for salary distribution, KSRTC had to pay Rs 48 lakh in interest per month. Despite receiving government assistance, it has proven insufficient to alleviate these financial burdens.