The Hindu Business Line : Kerala's financial position grim, says Minister

The financial position of Kerala is so grim that there is not enough funds to implement even one-fourth of the annual plan for 2006-07, according to Mr Thomas Isaac, Finance Minister.

He said here on Tuesday that the State is on the verge of a debt trap and has been declared a "debt-stressed State."

The Minister said that there were only three options before the Government to tide over the financial crisis.

One of them is to resort to a drastic cut in the plan size.

The second one is to ask the Centre to allow the State to go in for additional borrowings, while the last option is to tighten the tax collection in the State where only one-third of the potential is now being realised.

Mr Isaac said that there was little scope for across-the-board reduction in expenditure in the State.

Therefore, the Government would focus more on the revenue side.

The Minister noted that the previous United Democratic Front (UDF) government had made claims about the fiscal position of the State on the basis of inflated figures about revenue and highly scaled down estimates of expenditure.

It had gone in for a Rs 6,450-crore annual plan hoping to borrow about Rs 7,000 crore.

However, this was impossible now because of the status of Kerala as a debt-stressed State.

He said that the previous government had not made any provisions for major expenditures like wage revision, which required additional funds to the tune of Rs 1,500 crore.

On the other hand, the provision in this year's budget is ony Rs 1,135 crore.

Even if a significant portion of this amount is impounded in the provident fund account of the employees, the pay revision expenditure will require an additional amount of Rs 900 crore.

In the case of payment of pension arrears, too, there is no separate allocation for the purpose.

As much as Rs 190 crore is needed for paying pension arrears and Rs 150 crore for providing ration rice at subsidised price for BPL families.

The Minister pointed out that according to rough estimate, the Kerala State Transport Project (KSTP) would require Rs 3,000 crore to be fully implemented.