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State may Be Forced to go for Overdraft

Published: 20th February 2015 06:03 AM  |   Last Updated: 20th February 2015 06:03 AM   |  A+A-

 THIRUVANANTHAPURAM: With only a month and a half left for the financial year to end, the state may have to resort to overdraft to meet the additional expenditure which will arise by the end of March.

Experts warn that if the measures initiated  by the government to mobilise funds did not make the intended result, it will not have any other option but to go for overdraft. The government’s attempt to transfer the money parked in welfare board funds to the state treasury is yet to show results as almost all the boards turned a deaf ear to the government’s demand.

The state will need between Rs 6000 crore to Rs 7000 crore to meet various expenses like retirement benefits for employees as mass retirement takes place in March - which alone will require an amount of Rs 2000 crore, the pending payments to contractors - around Rs 2500 crore and pending Plan outlays to local self government bodies.

The state has already borrowed Rs 12,200 crore, with the borrowing of Rs 1000 crore in the beginning of this month. The maximum permitted limit of borrowing for the current fiscal is Rs 13,950 crore.

No one is expecting a miracle to happen with the remaining Rs 1750 crore.

‘’The situation is such that if no rigorous steps are taken the state will have to resort to overdraft. The government should take strict action against the welfare boards which do not transfer funds as per the direction.

Most of the welfare boards in the state,  instead of assisting the state in crisis, are going ahead with their extravaganza which is yet another burden for the state exchequer,’’ said an economist.

Experts are also pessimistic about the government’s attempt to seek more assistance from the Centre. ‘’The Centre’s position is also not much better than the state. The state’s plea at this time would not make any impact,’’ said Public Expenditure Review Committee member Mary George.

Another expert, on condition of anonymity, said that to avoid measures like accessing ways and means advances - the RBI method of providing credit to states when there is a mismatch in receipts and payments - the state will have to take stern measures such as non distribution of pending payments and arrears and advance collection of taxes of the next financial year which are all difficult to opt for. But some are of the opinion that the state could tide over the crisis by opting to various measures without depending on overdraft.

‘’The measures are not impossible though tough,’’ said faculty of Gulati Institute of Finance and Taxation Jose Sebastian.

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