Government secures Rs 1,500 crore loan for employee salaries until March

THIRUVANANTHAPURAM: The state government is set to obtain an advance loan of Rs 1,500 crore to cover employee salaries until March, after successfully clearing this year's loan. Seeking permission from the Central government for a loan of Rs. 2,000 crores, they've managed to secure Rs 1,500 crores and plan to finalize the deal this week. Notably, this marks the first instance of such an advance.

In attempts to procure funds for various expenses, including salaries, the state previously approached cooperative banks in December but failed. Consequently, they sought permission from the Center for a loan starting from January. However, early borrowing is anticipated to impact subsequent months' loans, potentially worsening the situation if the Center does not intervene.

Kerala applied for an additional loan equivalent to one percent of the GDP (Rs. 11,000 crores) but was unsuccessful. The Central government's stance remains firm, stating that such allowances cannot be granted solely to Kerala. Additionally, the request for permission to borrow Rs. 5,500 crores, earmarked for acquiring land for national highway development, was turned down.

An allocation of Rs. 1,700 crores was sanctioned to contribute as a guarantee for employees' National Pension Scheme. The Center's position asserts that states can receive financial assistance in line with the directives of the Finance Commission. However, Kerala's current financial outlook appears bleak.

The financial strain has been exacerbated by substantial expenses incurred for salary reforms and additional spending during the Onam festival. The state faces a monthly cost of Rs. 15,000 crores against an income of Rs. 12,000 crores, resulting in a monthly deficit of Rs. 3,000 crores, which is met through borrowing.

This year alone, Kerala has borrowed Rs. 21,800 crores. The borrowing limit for states is 3% of the Gross Domestic Product (GDP) and Kerala's GDP stands at 11 lakh crores, granting a loan limit of Rs. 32,440 crores. With an additional Rs. 4,500 crore for power sector reforms, the total loan allowance amounts to Rs. 36,940 crores. However, the Central government has reduced this by Rs. 10,009 crores due to KIIFB (Kerala Infrastructure Investment Fund Board) and treasury loans. As a result only Rs. 26,931 crores remain, out of which Rs 21,800 crores have already been borrowed from April to December leaving a pending sanction of Rs. 5,131 crores from January to March.