Kerala finance miniser hails Centre's move, but slams 'strings' attached to it

THIRUVANANTHAPURAM: The state government has welcomed the Centre's decision to raise the borrowing limit of states from 3% of gross state domestic product (GSDP) to 5% in the current fiscal, but has expressed reservations on 'clauses for adhering to specific financial reforms for availing additional loans'.
Responding to Union finance minister Nirmala Sitharaman's announcement in this regard, state finance minister T M Thomas Isaac said the state was opposed to reforms mentioned by the central government and that the state would demand removal of such clauses for availing of loans.
"It's meaningless to impose clauses for availing loans which have to be spent in accordance with the respective state's priorities," he told reporters here on Sunday.
Pointing out that the decision to raise the borrowing limits would help avoid administrative deadlock in states, Isaac said it was chief minister Pinarayi Vijayan who first made the demand.
"However, it will facilitate Kerala avail of an additional loan of Rs 18,087 crore only, which would be insufficient to make up for the Rs 35,0000 crore revenue dip estimated for the state in the current fiscal," he said.
"So, the Centre should pay out the whole GST share due for the state immediately," he added.
Besides, the borrowing limits should be based on the states' revenue already approved in the central budget, as the state's revenue in actual will see a further dip in the wake of Covid-19 pandemic and lockdown, the finance minister said.
Isaac also demanded permission for procuring loans directly from the Reserve Bank of India (RBI) rather than from other banks, "so that loans could be availed at a reasonable interest rate". "The state borrowed Rs 9,000 crore out of Rs 14,000 crore available as per authorised limit from banks, at 9% interest rate," he pointed out.
Stating that Kerala will officially register its protest on clauses and try for discussions and negotiations with the Centre, Isaac said the Centre was exploiting the situation to force reforms on states ruled by political parties of diverse views.
"We are against limiting the role of public sector units and also against reforms in the power sector. What if such reforms are placed as clauses for additional borrowing?" he asked.
The state is not against concepts like 'one nation one ration card' and 'ease of doing business', but several announcements made to achieve ease of doing business are detrimental for the public sector, Isaac said. "The CM will be writing an official letter registering protest and seeking opportunity for negotiations," he added.