THIRUVANANTHAPURAM: In the wake of the Supreme Court postponing Kerala’s suit against the cut in borrowing limits imposed by the Centre to March 6, the state will be forced to explore other options to tackle the liquidity crisis, that too, at the end of the financial year when the treasury will face a huge payout. However, only a few options are left before the state government to tackle the liquidity crisis if it fails to secure a favourable interim order from the apex court.
Recently, Kerala had rejected the Centre’s offer to grant additional borrowing space of Rs 13,608 crore if the state withdraws the court case. According to the state government, it was an ‘undisputed’ and eligible space and the state had already met the preconditions for it. The state reiterated its demand for Rs 26,226 crore. The apex court, so far, has not delved deep into the merit of the complaint and instead asked both parties to resolve the ‘purely financial issues’ through dialogue.
An interim order for an immediate payout would help the state government to tide over the crisis. But if it doesn’t happen, only a few options, like a cut in plan outlay and deferring of the plan bill payments, are left. So far, only 58.45 pc of the annual plan outlay worth Rs 38,629.19 crore has been spent.
A drastic cut in the remaining portion would be inevitable to meet the huge payout in March. The outflow of cash from treasuries in March last year was nearly Rs 22,000 crore.
The revised norms on fixing the ceiling on market borrowings diminished the scope of availing short-term borrowings from the cooperative banking sector. As per the new norms, such borrowings would be adjusted from the net borrowing ceiling for the next financial year. Already, the Bill Discounting System (BDS), a short-term borrowing window invented by the state government, is under the Centre’s scanner. Under the BDS, the government issues promissory notes to public work contractors who would discount it with banks.
The treasury queue system is another method adopted by the government in recent years to overcome the paucity of funds. Under this, payments at the end of a financial year are deferred to the next year.