Kerala can breathe easy as Center nods for loan of up to Rs 5,000cr

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Thiruvananthapuram: Ending a week of suspense, the central government has finally cleared the Kerala government to take out a loan of up to Rs 5,000 crore.

This decision will certainly bring temporary relief to the state government, which is currently reeling from a financial crisis. The state government hopes to take out the loan by next week.

Although the Center has authorized the State to contract a loan, there is no change in its position that the loan provided by KIIFBI and other public sector units will be treated as a loan contracted by the Government of the Kerala.

The state government fears that the Center could halve the state’s total borrowing capacity, which currently stands at Rs 32,435 crore.

The final calculation of the loan amount taken by the state government through other agencies over the past two years is yet to be completed.

After evaluating the total loan granted by the State, the Center will inform the State of the final ceiling of the maximum amount to be borrowed. Although there is a ban on availing loans until then, an exemption has been granted to the state to take out a loan as a temporary measure to find a solution to the current financial crisis.

The minister says the situation is serious
Finance Minister KN Balagopal informed the Cabinet meeting the other day that the financial situation of the state was precarious.

According to him, all development work in the state would be affected if the Center included the loan amount taken out by KIIFBI while setting the total loan limit of the state government.

He told the Cabinet meeting that the government was struggling to find money for day-to-day expenses.

Balagopal said that now tax collection is less compared to other periods since it was the beginning of the fiscal year.

He also sought the intervention of the chief minister, saying that the central government had put unnecessary pressure on the state by delaying the decision to grant permission to use a loan as long as possible.

Center-state arm wrestling
The Center has ordered to account for loans raised through the Kerala Infrastructure Investment Fund Board (KIIFB) and other public sector institutions to the credit of the state. The Comptroller and Auditor General had also suggested including the loans thus contracted in the credit of the State.

The state government, however, objected to this suggestion. The Center also reported discrepancies in state loan statements.

Normally, states are allowed to borrow through bonds at the start of the fiscal year itself. Kerala had made preparations to qualify for a loan of Rs 4,000 crore this month but was pushed into a crisis with the Center refusing approval.

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