Kerala in debt trap: Uncertainty regarding salaries and pensions

THIRUVANANTHAPURAM: Kerala is facing an unexpected financial crisis as the assembly elections are set to begin in March. The Centre's massive reduction in the borrowing limit has added to the crisis. There are concerns that the salaries and pensions of state government employees may be delayed.

Kerala spends an additional Rs 2,000 crore every month in addition to tax revenue. This is met through borrowing. The expenditure will increase sharply at the end of the financial year as the bills of contractors and others will have to be paid. Rs 20,000 crore will have to be paid to contractors and others in the last quarter. Another Rs 15,000 crore will be needed to pay salaries and pensions. More money is needed for pension distribution as the welfare pension has been increased to Rs 2,000. It is estimated that the government will not be able to distribute salaries and pensions in the current situation.

Five reasons for the crisis

1. According to the audit so far, Kerala's expenditure is Rs 39,023 crore more than its income. The gap between income and expenditure was Rs 28,976 crore in the last financial year.

2. GST and land tax have decreased compared to the previous year. Only Rs 2,109 crore has been received so far out of the central grant of Rs 13,074 crore. This is due to disputes with the centre in various schemes and the non-timely implementation of centrally sponsored projects.

3. Rs 12,515 crore was allowed to be borrowed from January to March. The centre reduced Rs 5,944 crore from this. The remaining amount is only Rs 5,672 crore.

4. The centre unexpectedly withdrew its promise to release Rs 3,300 crore, which was withheld due to the state government not setting up a reserve fund to ensure repayment of the guarantee.

5. There will be an additional expenditure of at least Rs 2000 crore in April alone if the salary revision is announced. Funds will also have to be found to start providing new benefits that may be introduced through the budget from April.