Kerala wants Centre to take loan and compensate states

THIRUVANANTHAPURAM: A virtual meeting of finance ministers from various states to find a common ground for their reaction to the Centre’s proposals for mobilization of resources to meet the GST revenue gap will be held on Monday.
Finance minister T M Thomas Isaac said on Saturday that the virtual meet was a coordinated attempt by several state governments that were worried about propositions Centre had made recently while discussing the disbursal of GST revenue gap that were due to governments.
“It’s unlikely that there could be a common charter of demands among states. We are exploring whether we can find a common ground in our reaction to the propositions. Individual states would be stating their reactions to the GST council in different ways,” Isaac said. Isaac added that state government would put on record that none of the two proposals, suggested in the GST council, were acceptable to Kerala.
“Centre should borrow the Rs 2.3L crore due to the states as GST compensation and distribute it among states. Centre, if worried about the ill-effects of market borrowing of such a huge amount, should borrow the same from RBI,” he said.
Centre had suggested at Thursday’s meeting that states may source the dues through market borrowings and Centre was willing to increase the borrowing limits by 0.5%. Else, states may take loan to meet the reve. nue short fall due to GST implementation, which was calculated at Rs 97,000 cr. The GST council has given a week’s time for states to intimate their choice.
Isaac said NDA government at the Centre was unnecessarily irritating the government by making impossible propositions. The interest rate could go up from 1-2% when state government tries to borrow. Also, the 0.5% increase in borrowing limits won’t be enough for Kerala and states like Karnataka to source loans that can match the compensation figures.
Isaac said the pandemic alone can’t be blamed for the current economic slump. In September 2019, finance commission chairman had asked all states not to stick to the demand that Centre should continue to give its promised compensation at 14% annual growth rate till 2023.
“The slump had started much earlier, with demonetisation. Compensation was promised to lure states to the GST regime. Centre can’t simply go back from that promise,” Isaac said.
As per rough estimates, GST compensation due to Kerala was around Rs 6,000 crore till July.