Onam is Kerala’s traditional harvest festival, one of its grandest on its annual calendar, too. But left to itself, the State government of the day would beg to differ. It might not even recall the last time when it allowed itself the freedom to celebrate since its ‘hands were tied’ or the ‘belt tightened’.

It’s not different this year either. The Left Front government finds itself unsure how and where to raise an estimated ₹8,000 crore to meet festival expenses falling under several heads. It needs at least ₹1,700 crore right away to keep a promise of welfare pension payout for two months at one go.

Last year, a bonus of ₹4,000 was paid to each government employee. Those not entitled for the bonus was given ₹2,750 as special festival allowance. A festival advance of ₹20,000 was also granted to government employees and ₹6,000 to part-time and contingent staff based on their salaries.

Why pre-Onam government spending is muted  Why pre-Onam government spending is muted  
Huge fund gap

The benefits and assistance had reached out to over 13 lakh employees and labourers, a tough act to follow with Onam barely 20 days away. Out of the ₹8,000 crore it needs to raise, the government has made it known that ₹3,000 crore would come via borrowing through the Reserve Bank of India. 

It is looking to raise a portion of the rest by tapping cooperative banks and traditional milch cow Kerala State Beverages Corporation. It would still leave a huge gap in required funds, and the government is looking to explore other possible options. It has attributed the brewing but familiar crisis to the Centre’s allegedly motivated exercise to cut the borrowing limit this year.  

‘Centre to blame’

Chief Minister Pinarayi Vijayan highlighted the predicament in the State Assembly on Tuesday accusing the Centre of throwing spanner in the works through its unilateral order to treat development loans/off-budget funds/extra-budget borrowing, including by special purpose vehicle Kerala Infrastructure Investment Fund Board (KIIFB), as debt of the State government.

This was arbitrary, resulting in significant reduction of the borrowing limits of the government. The Chief Minister’s statement came on the floor of the House in response to a query on the status of projects being funded by KIIFB in the State. Finance Minister KN Balagopal, too, has been venting frustration over the ‘Centre’s unbecoming attitude’ as recently as in May.

Union Minister denies 

He had said the State was expecting to raise ₹32,442 crore from the market when the borrowing limit ‘was abruptly’ cut from 3.5 per cent to 3 per cent. A letter from the Centre later stated the the borrowing limit was further pruned to ₹15,390 crore, or around half the state’s entitlement. This had exposed the Centre’s political vendetta, Balagopal claimed. 

Union Minister for State for External Affairs V Muraleedharan who represents the state in the Union Cabinet joined issue with Balagopal, and pooh-poohed the ‘vendetta’ theory. He pointed out for 2023-24, the State was permitted to borrow ₹32,442 crore at 3 per cent of its Gross Domestic Product in accordance with the 15th Finance Commission recommendations. 

‘Fails to convince’ 

Additionally, it was allowed to raise ₹20,985 crore under replacement borrowings (Central securities in place of state bonds). This apart, ₹1,755 crore would be made available as Central contribution under the National Pension Scheme. This would make for aggregate borrowings of ₹55,182 crore, out of which ₹34,661 crore has already been raised by the state. 

Muraleedharan said of the remaining ₹20,521 crore, the Centre has sanctioned ₹15,390 crore for the first nine months of the financial year. The balance of ₹5,131 crore would be allowed towards the end of the financial year. “Given this, the allegation of political vendetta or a motivated reduction in borrowing limit fails to hold water,” the Union Minister of State said. 

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