THIRUVANANTHAPURAM: The state government is likely to have a tough time paying salaries, pensions and social security pensions by the end of Onam season. According to a national daily, numerous cuts in loans imposed by the central government and its decision to stop paying GST compensation to states have come in as a major setback for the state.

The media report quoted Finance Minister K N Balagopal and stated that he has admitted the findings. “There will not be any immediate fallout from the cut in centre’s flow of funds. We will be able to manage salary, pension and social security pension payments for now. However, there will be a crisis in the second half of the fiscal if a substantial portion of the funds is not reinstated. The state will face a shortage of around Rs 23,000 crore in the fund flow from the centre”, said the minister.

The central government’s decision to adjust Off-Budget Borrowings (OBB) worth Rs 14,000 crore in the net borrowing ceiling of the state, had resulted in the crisis. On considering three and a half percent of GDP, Kerala can borrow a total of Rs 32,425 crore. However, the centre is not ready to approve such a huge amount. The centre has informed the state that the loans taken by welfare pension company Kerala Social Security Pension Limited (KSSPL) and KIIFB are treated as government debt. According to CAG estimates, Rs 14,000 crore was borrowed for KIIFB and welfare pensions. The centre’s current decision is to cut the borrowing limits in phases over four years. Hence, there will be a drop of Rs 3,578 crore in the borrowing ceiling, this year. The centre has also cut of Rs 7,000 crore in revenue deficit grant in 2022. As a result, the state will not get Rs 12,000 crore, which it had been receiving as GST compensation, last year. As of now, the centre has approved to borrow only Rs 17,936 crore until December, which is Rs 5,656 crore less than what was allowed last year.

According to media sources, during Onam, three months’ welfare pension will have to be distributed to 52.5 lakh pensioners. This will require around Rs 2,500 crore. If KSSPL borrows the amount from agencies like Kerala State Financial Enterprises or Kerala Financial Corporation, it will further affect the state’s borrowing ceiling.