Kerala runs up overdraft after Onam payouts, seeks to raise ₹500 cr

The Kerala exchequer is learnt to have run up an overdraft to the extent of ₹100 crore after it exhausted its Ways and Means Advances facility with the Reserve Bank of India.

The State has already approached the market to raise ₹500 crore to deal with the emergency situation created by the outgo in special Onam-related payouts to employees and other expenditure.

This is the latest tranche in a series of debt-raising transactions which have already yielded ₹6,000 crore against a budgeted programme of ₹14,500 crore for the whole year (2014-15).

Most of the funds raised have gone to finance routine expenditure such as disbursing salary, pensions, and other expenses, putting a big question mark on the quality of spending.

The funds will also be used to clear the overdraft situation by repaying the Reserve Bank within the stipulated time of 14 consecutive working days.

Any amount drawn by a State in excess of Ways and Means Advance is an overdraft. This is the first time since year 2004 that the State runs up an overdraft.

The reported overdraft situation caps a series of adverse developments on finances worsened by the potential drying up of the revenue tap from alcohol excise as part of the new liquor policy.

The near-term hit to the revenues is estimated to be ₹1,800 crore. But the long-term implications are huge since the State draws up to 22 per cent of its revenues from alcohol excise.

Shashi Tharoor, Congress MP from Thiruvananthapuram, expressed concern saying that there is a “bit of political competition for a holier-than-thou image here but I don’t think everything was fully thought through.”

He said this in reference to the war of words between State Congress President VM Sudheeran and Chief Minister Oommen Chandy that culminated in a surprise but staggered ‘total prohibition’ policy.

Tourism Minister AP Anilkumar fears that the new policy will set the clock back on revenue from tourism which earned more than ₹22,000 crore last year.

Nearly six out of 10 Indian travellers who are planning holidays to Kerala could call off their trips after hearing about the prohibition policy, a 30-city survey by a travel advisory portal has found.

Meanwhile, the Chief Minister said in a function at Varkala near here on Monday that there was no going back on the liquor policy and that the State will explore other ways of raising resources.

The two things which worried him were the rehabilitation of tens of hundreds of bar workers displaced by the policy as also the threat from bootleggers and the likely flooding of the market by ‘seconds.’

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