Kerala owes Rs 48,733 crore; White Paper warns of deep financial crisis, suggests tough measures

THIRUVANANTHAPURAM: Kerala's financial crisis is far more severe than previously believed, according to a White Paper released by the state government on Thursday. The report states that the government owes Rs 48,733 crore to employees, contractors, and others. To address the crisis, the White Paper recommends conducting salary revisions once every ten years and increasing the retirement age of government employees.

The report says Kerala is facing a steady decline in both its financial condition and development. It also claims that the Kerala Infrastructure Investment Fund Board (KIIFB), introduced by the previous Left government, has become a financial burden. The White Paper was presented in the Assembly by Chief Minister VD Satheesan, who also handles the Finance Department. It was prepared by a team of economic experts led by Additional Chief Secretary K.R. Jyothilal and K.M. Chandrasekhar.

According to the report, Kerala's total debt has risen to Rs 5.07 lakh crore. Nearly one-fifth of the state's revenue is spent on interest payments alone. Instead of controlling salary and pension expenses, the government has been reducing development spending, which the report says is harming the state's growth. The White Paper also states that postponing dearness allowance (DA) payments was one of the methods used to reduce expenditure. As a result, pending liabilities have increased to Rs 48,733 crore, which is more than the total amount the state borrows in a year.

Losses of public sector enterprises have reached Rs 78,851 crore. Kerala's unemployment rate has risen to 20.7 percent, compared to the national average of 4.5 percent. The report stresses that cutting down expenses alone will not solve the problem and calls for new sources of revenue. It also recommends creating a consolidated fund to clear outstanding liabilities.

Key recommendations in White Paper

1. Raising the retirement age of statutory pension employees from 56 could save the government around Rs 6,000 crore. Employees under the contributory pension scheme already retire at 60.
2. Salaries and pensions currently account for nearly three-fourths of the state's expenditure.
3. Welfare pensions should be transferred directly through scheduled banks. At present, many payments are routed through cooperative banks.
4. A detailed study by a leading agency is recommended to expand GST revenue. Separate studies should be conducted to improve the performance of KSEB, Kerala Water Authority, and KSRTC. The usefulness of K-DISC and K-Rail should also be reviewed.
5. The State Planning Board should be restructured, and a file time-management system should be introduced in the Secretariat.
6. Consultancy-related expenditures should be reviewed, and better relations with the Central Government should be restored.

"The White Paper is a mirror held up to the previous government's administration. Financial mismanagement was justified using cliché communist rhetoric."
-VD Satheesan
Chief Minister

"The White Paper is an attempt to justify privatisation. It actually proves that Kerala is not trapped in a debt crisis."
-KN Balagopal
Former Finance Minister

"Many points that were already mentioned in the BJP's election manifesto have been presented as new findings in the White Paper. The state should move forward realistically and work in cooperation with the Central Government."
-Rajeev Chandrasekhar MLA
BJP State President