Kerala Chief Minister Pinarayi Vijayan’s attempt to jumpstart the Covid-19-hit economy with a ₹20,000-crore package on Thursday was notable not only for being ahead of the Prime Minister’s televised address to the nation but also for the bravado in the context of the State’s nearly empty coffers.

The developments came on a day when Kerala reported one more case of Covid-19 infection in the northern-most Kasaragod district on Thursday. With this, the total number of positive cases currently under treatment has risen to 25. Three cases in January and February, also the country’s first, have recovered fully and sent home. The person identified as positive on Thursday had reportedly arrived from Dubai.

CM's package and PM's address

As of Thursday, 31,173 persons are under surveillance in the State, of which, 30,926 are home quarantines and 273 in hospitals, the Chief Minister told local administration officials and people’s representatives in a videoc-onference. The number of persons coming under surveillance afresh was 6,103 and those found with no symptoms and sent home, 5,155. The number of samples sent for testing was 2,921, of which, as many as 2,342 have been confirmed to be negative.

The Chief Minister announced the package a few hours before Prime Minister Narendra Modi addressed the nation during when he announced the setting up of a Covid-19 Economic Response Task Force led by the Union Finance Minister to deal with the situation arising out of novel coronavirus outbreak. This task force will also ensure that all steps are taken to reduce the economic difficulties and execute them effectively.

Poor state of finances

The Prime Minister also said that the task force will remain in regular touch with all stakeholders, take their feedback and make decisions accordingly. But sources in the State government say that Chief Minister Vijayan may have just earned brownie points by reaching out first to the public with a defined economic package even before the the task force was announced at the Centre, not to speak of the kind of intervention he could possibly have in mind.

What seems to have led critics to doubt the efficacy of Vijayan’s package is the state of finances in Kerala after being ravaged by the deleterious impact from demonetisation, flawed GST implementation and the century’s worst floods in 2018 with a near-encore in 2019. Besides, the State has been crying hoarse over the Centre’s alleged act of paring down its share of approved loans, which had only worsened the situation. In its turn, the Centre had cited an increase in the fund in the State’s PF treasury accounts to deny the latter's demand.

Huge liquidity crisis

Finance Minister Thomas Isaac said that the State had expected approval for a loan of ₹4,908 crore from the Centre during the final quarter of the current financial year, but it gave the approval for only ₹1,920 crore. He had also pointed out that there has been a huge liquidity crisis due to the delay in dispensing the compensation following the loss incurred due to GST implementation.

“We have not received the compensation from October last year. The compensation being paid every two months will be around ₹1,600 crore. The corporate tax exemption will also affect the income through tax here too,” he added.

Despite the floods, the Centre has not allowed the State government to utilise the loan beyond the limit for the rebuilding initiative, Isaac said. He had said in his budget speech that the finances had worsened after the Centre cut down the State’s share of central taxes.

“It’s clear that the Centre is throttling us by cutting down our borrowing limits. It has also cut down grants in the Central schemes. These have driven the State to an unprecedented financial crisis. But we have designed alternative strategies and novel tax reforms to increase revenue collection. Our position will improve in April and we expect to have a smooth sail in the new financial year.”

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