THIRUVANANTHAPURAM: The Finance Department has issued an order clarifying that the government will not stand as a guarantee to provide loans to any institutions, including KIFB and KSRTC. This will adversely affect the development projects of around 60 public sector institutions and around 1,000 local institutions. KSRTC, which is struggling even to provide salaries, will suffer a heavy blow.

The government will also have difficulty finding the money for the social security pension. Financial institutions, including cooperative banks, have been providing loans worth crores of rupees on the backing of government guarantees. The state is in dire financial straits due to the Centre's stance that if the state government gives a guarantee, the state's borrowing limit will be reduced by considering the loan as that of the government.

Two weeks ago, a loan of Rs 2000 crore was taken from HUDCO in connection with Vizhinjam port. Soon, the Comptroller and Auditor General issued a letter saying that it would be treated as a loan of the state. Sensing danger, the Finance Department took the stand that it will no longer stand guarantee to anyone.

The Centre had reduced the state's borrowing limit for the current year on account of loans taken for KIIFB and Social Security Pension Company etc. While Kerala is eligible to take loans worth Rs 32,440 crores, the Centre limited the state's borrowing limit to 20,390 crores citing these reasons.

What happens next

1. KSRTC and other institutions should arrange loans on their own whether for welfare activities or development projects. The institutions should deal directly with financial institutions.
2. The conditions should be fixed directly by the borrowing institution and the financial institution. Government shall not be responsible for risk factors, including loan fees, commissions and other charges.
3. It shall be the responsibility of the institution to complete the repayment of loan principal, interest and other expenses on time.

Loans under government guarantee

• KSFE................................................. ................12974 Crores
• Cooperative Agriculture and Rural Development Bank ...........................................5830 crores
• KSRTC........................................ .................3178 crores
• Urban and Rural Development Finance Corporation...................................................3054 crores
• Kochi Metro................................................... ........................1110 crores
• Social Security Pension Limited ...........1773 crores
• Transport Development Finance Corporation ...............................................832 crores
• KIIFB ................................................... ........................................550 crores
• Back word classes
• Development Corporation.............................................1078 crores

Current guarantee to institutions- Rs.46,391 crore