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Centre allocates Rs 3,140 cr for Kerala to avert financial crunch

NEW DELHI: In a major relief to the Kerala government which is reeling under enormous financial stress, the Union Finance Ministry decided to allocate Rs 3,140 crore to the state, on Friday.

The allocation, through open market borrowing, is being done amid constant confrontations between the central government and the state government for the state of Kerala.

 

“The relaxation given to GoK wrt deduction of Rs 3140 crore of Open Market Borrowings, in subsequent years, reflects Prime Minister @narendramodi Ji’s deep concern for the well being of the people of Kerala”, tweeted Minister of State V Muraleedharan after meeting Union Finance Minister Nirmala Sitharaman.

Initially, the Pinarayi Vijayan-led government had approached the Supreme Court, accusing the Centre of interfering in the state’s autonomous power to regulate finances. The Left Democratic Front government had accused the Centre of imposing a ceiling on net borrowing.

 

However, Prime Minister Narendra Modi’s government refuted the claims stating that they had not curtailed Kerala’s borrowing limit and it was the state government’s fault for mismanaging finances for “extravagance”.

In its SC petition, the Vijayan government had contended that the Centre was infringing upon its fiscal autonomy by amending the Fiscal Responsibility and Budget Management Act (FRBM), 2003, to curtail its borrowing limit. In 2022, the Modi government had amended the Act to “reduce the fiscal deficit to below 4.5% of GDP by 2025-26”.

Vijayan’s government further claimed that the Centre had reduced its borrowing limit to Rs 15,390 in August, highlighting that Rs 26,000 crore is required to avert the crisis.

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