The State government will have to tighten its purse strings further and drastically slash expenditure to sustain welfare pensions and other initiatives in the wake of a cut in Central transfers and allocations from the divisible pool of taxes.
The State is already battling a grave resource crunch and the 15th Union Finance Commission’s proposal to maintain status quo in the allocation for the next financial year has rendered a rude jolt to the government.
The Centre’s indecision in clearing the Goods and Services Tax compensation arrears, the wages and administrative cost of the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) amounting to about ₹1,250 crore and ₹1,050 crore for the paddy procurement scheme have compounded the financial woes of the government.
The cut in allocations for the job scheme and the alleged indecision in clearing the arrears would have serious implications in the State since it is the sole source of succour for 15 lakh families below the poverty line. About 95% of the 12.98 workers enrolled in the scheme are women and if the Centre refuses to clear the arrears and evolves a system for timely payment of wages in future, it would push them further to the brink of poverty and misery.
Paucity of funds would derail the paddy procurement scheme and deepen the crisis in the agrarian sector. The proposal to restrict the UFC award to about ₹17,000 crore has also gone against the State’s expectation to get an enhanced share of ₹20,000 crore.
Finance Minister T.M. Thomas Isaac’s bid to mobilise the support of the Finance Ministers of non-BJP ruled States in prompting the Centre to raise the annual borrowing limit of States and timely release of GST compensation arrears seems to have been cold-shouldered by the Centre.
Kerala was not even give its due in the flood relief granted by the Centre. The dip in tax collections and drastic cut in Central transfers would put the State in dire straits. In the current context, the State government could ill-afford to shelve any of the welfare schemes, mainly the pensions citing paucity of funds.
The only option was to drastically cut the expenditure and go on a resource mopping drive by shoring up the tax collection to make up the deficit, sources said.