THIRUVANANTHAPURAM: Debt and taxes are likely to increase in the state budget to be presented by Finance Minister KN Balagopal on Friday. The loss of revenue during the Covid period and the lack of central assistance could lead to a major financial crisis. Revenue must be increased in order to overcome this. However, the state government does not have the power to raise the sales tax. Efforts will be made to keep state-level taxes and rates for non-tax services high. More loans will be required.

The change in central policy affects revenue in three ways. The allocation from the Divisive Pool received on the recommendation of the Finance Commission will be reduced. GST compensation will not be available from June. The central grant for reducing the fiscal deficit will also decrease.

The state will experience a deficit of around Rs 12000 crore to Rs 16000 crore through these three. In addition to this, there is a loss of financial, commercial and commercial revenue due to Covid.

The state is having a debt of Rs 3.27 lakh crore. If expenditure is not reduced and revenue is not increased, the debt liability may increase by at least Rs 40,000 crore. In addition, there are additional liabilities such as the SilverLine project. KIFB has sanctioned development projects worth over Rs 70,000 crore. The Silver Line is expected to cost Rs 66,000 crore.

The government will attempt to increase tax revenue from stamps, registrations, liquor, petrol, bars and lotteries. Rates charged for government services are likely to be increased. Although the GST cannot be increased, steps will be taken to curb tax evasion and tighten tax collection.

At present, the revenue expenditure is Rs 1.31 lakh crore. In the next budget, it is likely to cross Rs 1.50 lakh crore. With the pension reform, there was an additional liability of around Rs 4600 crore. In addition to this, the state also has to bear the expense of social security schemes. On an average, each state spends Rs 3,500 crore on social security in the country. In Kerala, it is over Rs 12,000 crore.