THIRUVANANTHAPURAM: The Centre, in its reply to Kerala's letter, said that it cut Kerala's borrowing limit keeping in mind the KIIFB loan and the treasury investment that the government can use. Kerala will approach the Supreme Court questioning this.

The gross domestic product of the state is 10.81 lakh crores. Rs 32442 crores which is 3.% of this can be borrowed. The state was hoping that the reduction of NABARD loans and National Savings Scheme loans would allow it to borrow 28550 crores this year. It was included in the budget. But only 15390 crores were sanctioned.

It is stated in the circular of the Centre that the loan sanction has been granted till December. Rs 20521 crores are sanctioned till March 31. In addition to the statutory amount of Rs 32,442 crore, the Centre has estimated that Kerala is eligible for a total loan of Rs 41,898.94 crore, including benefits for power sector reforms, progress of central projects, health and infrastructure projects. But Rs 900 crore NABARD loan, Rs 3500 crore as state allocation to National Savings Scheme, Rs 1300 crore received for foreign financial aid projects including Rebuild Kerala, Rs 2500 crore in the name of loan liability of KIIFB and Social Security Pension Limited, besides Rs 13177 in deposits in treasury and provident fund account at the end of the year adding to Rs 21377 crore, which has been reduced in the state's borrowing limit.

The state thinks that this is not fair. According to the CAG report, the treasury reserve is just Rs 6000 crore this year. Without taking that into account, the Centre has calculated the treasury reserve by taking the average amount of the last three years. It is also not right to include the KIIFB loan within the limits of the public debt of the state. The state also points out that similar loans are not included in the central government's credit limit.