Kerala FM says state staring at financial crisis due to reduced GST funds

"The financial health of the state has been seriously affected by a reduction in the revenue deficit grant to the tune of around Rs 7,000 crore this year and loss due to stoppage of GST compensation of around Rs 12,000 crore. In addition, the Ministry of Finance has arbitrarily, in the name of off-budget borrowing made a reduction of approximately Rs,4000 crores in the net borrowing limits of the State. In all the State Government will have to contend with a reduction of Rs 23,000 crore in the financial resources available to it for financing the budget in the current financial year," Balagopa' said in his letter written on July 22.

The Kerala finance minister told Sitharaman that the financial crunch posed a serious threat to the continuation of welfare schemes for the poor, including housing, education and health among others.

Unless the realities faced by the state, particularly in the aftermath of the Covid pandemic, are recognised by the Centre, the safety of the socio-economic security a system that the state has worked so hard to build over the last several decades will be in jeopardy, he said.

"The composition of the financial liabilities of state governments has changed significantly in the last 25 years. The share of loans and advances from the Centre has declined from over 15.8% of all state liabilities in 2005 to 3 percent in 2020. Kerala is no exception to this trend. The outstanding loans and advances from the Centre to Kerala State as a percentage of Kerala State's total liabilities have reduced from 12.4% in 2005 to 3.3% in 2020. " he said.

The Kerala finance minister further wrote that under the declared objective of fixing the net borrowing ceiling for states, Article 293(3) of the Constitution was being used to vitiate their independence and affect their financial autonomy. (ANI)