THIRUVANANTHAPURAM: The State Government, hit by acute shortage of funds, is resorting to borrowing for the second time this month to meet the additional requirements of Rs 1,400 to Rs 1,800 crore for Onam.
It is a herculean task for the government, which had already borrowed Rs 5,400 crore in the current fiscal, to meet the ‘extra burden’ of Onam for which it is depending on an unusual step - borrowing twice in a month.
The government will borrow Rs 1,000 crore by the end of this month in addition to the Rs 700 crore which it had borrowed during the first week of this month. “The government needs between Rs 1,400 crore and Rs 1,800 crore more to give bonus and festival allowance for the employees and to settle the pension arrears this month. Apart from that there should be Rs 1,400 crore - Rs 1,500 crore in the state’s account to give salary for the next month after Onam. Therefore the government is planning to borrow Rs 1,000 crore by the end of August,” highly placed sources in the Finance Department told ‘Express’.
In 2013, the state had borrowed Rs 1,500 crore in August for meeting the additional requirments of Onam which rose to Rs 1700 crore this year. The borrowing of the state was roughly Rs 5,200 crore during the same period in the previous year which increased to Rs 5,400 crore this year.
The trend of the corresponding period of the previous year - inflation of 8-9 per cent outweighs the 10 per cent increase in sales tax revenue which in effect leaves net growth negligible - is repeating this year as well in the state. The growth in sales tax revenue was 10 per cent only till this month of the fiscal which was the same as last year.
The reduction in industrial production and the slackness in collecting the arrears of sales tax have made the condition worse. Though a special drive to collect the arrears had commenced months ago it did not yield the desired results as in many cases the attempt ended up in litigation as the tax payers approached the court and managed to get stay orders.
It was the dip in the growth of sales tax revenue and poor tax collection in the previous year which made things worse.
The state had requested the Centre to bring in a stimulus package to rejuvenate the economy in the state Finance Ministers’ meeting convened in July and expects some steps from that corner. But the Finance Department expects that the tax collection drive would pick up momentum in the coming months and that would bring in some relief.
“It will take four to six months for such a drive to show result. The tax collection has improved around 12-15 per cent in the last three months and we are regularly reviewing the status. Also arrangements have been initiated to meet the extra requirement of funds during Onam,” said Additional Chief Secretary (Finance) V Somasundaran.