Centre forced Kerala’s exit from pension funding

In a letter accessed by TNIE, the Union ministry asked the state to provide correct and complete information on off-budget borrowings by KIIFB and KSSPL.

Published: 28th June 2022 06:21 AM  |   Last Updated: 28th June 2022 06:21 AM   |  A+A-

The Telangana government has decided to give another opportunity to eligible beneficiaries to avail the Aasara pension scheme.
Express News Service

THIRUVANANTHAPURAM: The state government’s order withdrawing financial support to the Kerala Social Security Pension Limited (KSSPL) appears to be a desperate attempt to overcome the Union government’s conditions for granting consent for open market borrowings (OMB).

The state issued the controversial order earlier this month after the Union finance ministry rejected its claim that KSSPL’s borrowings were not “direct debt of the state government”. In a letter accessed by TNIE, the Union ministry asked the state to provide correct and complete information on off-budget borrowings by KIIFB and KSSPL.

The letter bluntly told the state that in case of non-receipt of information, these would be deemed as off-budget borrowings.  The state is yet to get the Centre’s consent to raise OMB for the first three quarters of 2022-23, except an ad hoc sanction to raise `5,000 crore and also to avail `900 crore loan from the NABARD.

The consent for raising the remaining portion of OMB has been put on hold until the issue of off-budget borrowing is settled. The net borrowing ceilings (NBC) of Kerala for 2022-23, as per the methodology of the Finance Commission, is Rs 32,439 crore. It will be enhanced by 0.50 pc of the GSDP if the state meets certain performance criteria in the power sector.

State’s claim on borrowings wrong

The Centre said for issuing consent for OMB, off-budget borrowings by state public sector companies and SPVs will be considered as borrowings made by the state itself. This means off-budget borrowings will be adjusted in the NBC.

The state sought consent for OMB, claiming that KSSPL’s borrowing is limited to short-term advances from state PSUs and “does not contribute direct debt to the state government”. However, the Union finance ministry rejected this argument on May 20, 2022. The letter quotes CAG’s state finance report for 2019-20 that states KSSPL borrowings were “direct liabilities of the state government despite being off-budget”.

Further to the letter, the state, on  June 10, 2022, issued an order withdrawing financial support to KSSPL in a bid to avoid KSSPL borrowings being categorised as off-budget. Also, the claim that KSSPL’s borrowings did not contribute direct debt to state government was incorrect. For the 2018 order on KSSPL formation had clearly stated that the government would bear the repayment liabilities of the company.


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