THIRUVANANTHAPURAM: In what could turn out to be a big blow to the welfare fund distribution system, the state government has distanced itself from the Kerala State Social Security Pension (KSSP) Limited. The government has withdrawn all monetary support promised to the company at the time of its formation four years ago.
The KSSP raises fund through borrowings for the monthly payment of `1,600 each as social security pension to 52.27 lakh beneficiaries in the state. The KSSP was formed in June 2018 as a company wholly owned by the state government .
The government order (GO) on its formation had promised fiscal support to the company which would act as a special purpose vehicle for prompt distribution of welfare pensions. In 2019-20, the KSSP had borrowed `6,843 crore. The CAG report on state finances tabled in the assembly in November, 2021 had pulled up KSSP, along with KIIFB, for borrowings outside the purview of the state budget.
Senior officials of the finance department were tight-lipped when asked about the sudden provocation for the revised GO. However, sources hinted that the decision to withdraw the government support was taken in the wake of criticism by CAG and the Central government on using the KIIFB and KSSP as off-budget borrowing tools.
Govt order silent on KSSP-mobilised funds’ repayment, on future course
The Union ministry of finance again flagged the issue when the state approached it for getting sanction for market borrowings in the new financial year. The state was only given ad-hoc permission for borrowing `5,000 crore this fiscal as the Union government hasn’t resolved the issue of off-budget borrowings.
The 2018 GO during KSSP’s formation had said the government would provide funds to the company.
The company would also source funds on a temporary basis from other sources to meet its liquidity requirements, which would be serviced by the assistance provided by the government through its budget. The government would bear the repayment liabilities of the company arising on account of pension disbursement.
The company would raise funds from public, public sector undertakings and other institutions through suitable financial instruments including deposits and loans which would be serviced/redeemed with the funds provided by the government through its budget, the order said.
But an order issued by the additional chief secretary (finance) earlier this month said certain clauses in the previous GO restrict the liberty of the company in mobilising funds. Hence, certain clauses and sentences in the previous GO are deleted. They are: “which would be serviced by the assistance provided by the government through its budget”; “Government would bear the repayment liabilities of the company arising on account of pension disbursement” and “which would be serviced/ redeemed with the funds provided by the government through its budget”. The GO is silent on the repayment of funds already mobilised by KSSP. It also doesn’t mention how the company would raise funds without the government being the guarantor.