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KERALA SCRAMBLES FOR FUNDS AS CENTRE TIGHTENS

Why in news?

An alarming dip in the Kerala’s Own Tax Revenue, coupled with a delay and cut in Central transfers, have pushed the State to the edge of a financial precipice.

Kerala Down to a trickle

  • A comparison of receipts in April 2019 and April reveals the intensity of the crisis.
  • The Goods and Services Tax (GST) collection dipped to Rs. 153.26 Cr in April 2020 from Rs 1970 Cr in April 2019.
  • Further State Excise duty dipped from ₹193.08 crore to ₹22.83 crore and motor vehicle tax from ₹298.42 crore to a mere ₹3.52 crore.

Crisis is only Worsening

  • The Centre has not yet heeded the State’s demand for the release of GST compensation arrears of Rs. 5,000 crores.
  • The demand for raising the annual borrowing limit from 3% to 5% also remains unanswered.
  • The demand for enhancing the allocation for the National Health Mission to tackle the COVID-19 crisis is also not answered.
  • The State has pointed out that supply chain breaks due to the lockdown would result in a shortage of medicines and other essentials that reach Kerala from the neighbouring States.
  • A tranche of ₹1,276 crore provided by the Centre as Revenue Deficit Grant was perhaps the only major revenue inflow into the treasury this month.
  • The government’s decision to effect a six-day cut in the salary of employees and teachers for five months to cushion the impact of the pandemic’s impact ended in a legal tangle, with the High Court staying the decision for two months.
  • However, the deduction would earn the exchequer only ₹500 crore a month and ₹2,500 crore in six months. Moreover, the government will have to return the amount once the crisis blows over.
  • The only option left before the government is open market borrowing. The Reserve Bank of India has, however, cautioned the State against drawing huge sums from the market at exorbitant rates.

The Kerala State Electricity Board, the Kerala State Road Transport Corporation, the micro, small and medium enterprises, traditional industries and a host of other sectors are desperate for financial assistance to limp back to normalcy.

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September 2022
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