Centre cutting Rs 2,700 cr from borrowing limit in last minute forced Kerala to hike taxes: Fin min

Kerala finance minister K N Balagopal | Photo: Mathrubhumi

Thiruvananthapuram: The decision to impose a cess on fuel and liquor was a last-minute decision forced by a latest communication from the union government to the state, said Kerala finance minister KN Balagopal.

The union government informed Kerala on Thursday that Rs 2,700 would be cut off from the borrowing limit of the state for this financial year. The centre has been limiting the state's borrowings in a phased manner to include the debts of Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala Social Security Pension Ltd. (KSSPL) in the state's kitty.

The order which came on Thursday when the state’s budget preparation entered its last stage was a surgical strike on Kerala, alleged Balagopal.

The union government has warned that this condition will continue for the next year also. Kerala resorted to revamp tax rates in view of the rigid regulations over the state, said Balagopal.

The tax rate hikes and cess for fuel and liquor introduced in the state’s budget were not preplanned. Otherwise, the state would be forced to rely on more severe measures such as pausing welfare pensions. The state requires Rs 11,000 crore to dispense social security pensions and welfare pensions for 63 lakh households. The union government has allocated a credit of only Rs 973 crore in lieu of Kerala’s demand for Rs 17,500 crore in the months from January to March.

The union government has decided to reduce Rs 14,312 crore from the borrowing limit of Kerala within 4 years by considering the loans availed for KIIFB and KSSPL.

Minister Balagopal asserted that the state is eligible to borrow at least Rs 4000 crore in the upcoming fiscal year as per any of the prevailing rules.

Meanwhile, oppositin UDF has intensified the protest against the state government over the tax hikes.

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