Kerala is going through severe economic crisis as union government delays loan approval


Thiruvananthapuram: The union government has yet to allow Kerala to borrow money as the row over ‘miscalculations’ of previous borrowings continues. The state is reeling from a severe economic crisis because of this. The government may opt for strict cash controls if the situation does not change quickly.

As per the limit set by the finance department of the union, Kerala can borrow up to Rs 32,425 cr. Normally, this is permitted at the beginning of the financial year itself, in tranches through bonds issued by the Reserve Bank of India. It also includes loans from banks and LICs.

However, the union government is delaying clearance saying there are problems with previous years’ declarations. CAG had said borrowings from the Kerala Infrastructure Investment Fund Board (KIIFB) and utility companies should also be accounted for in the government’s balance sheet. However, the state opposed it.

The union government has also demanded an explanation on the use of the authorized supplementary loan during the Covid-19 lockdown. Government sources said the state has filed its response and affirmative action is expected soon.

The state had already made arrangements to borrow Rs 1,000 cr on April 19, Rs 2,000 cr on May 2 and another Rs 1,000 cr on May 10, according to the RBI schedule. However, permission from the union government was delayed.

At present, there is a restriction at the Treasury to approve bills above Rs 25 lakh. Other temporary control measures are also in place based on an analysis of current affairs.

Meanwhile, the union’s finance secretary, TV Somanathan, advised the state that action would be considered against officials if there were any shortcomings in the reporting of figures to the center.

The government has also demanded explanations from several other states.


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