Kerala pension firm borrowed Rs 32,000 crore in four years

The cumulative debt burden of Kerala Social Security Pension Limited (KSSPL) since its inception in June 2018 to May 2022 is estimated to cross `32,000 crore.

Published: 29th June 2022 06:37 AM  |   Last Updated: 29th June 2022 06:37 AM   |  A+A-

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Express News Service

THIRUVANANTHAPURAM: The cumulative debt burden of Kerala Social Security Pension Limited (KSSPL) since its inception in June 2018 to May 2022 is estimated to cross Rs 32,000 crore. After factoring in the interest to be paid to creditors, the liability will increase to at least Rs 35,000 crore, said sources in the accountant-general’s office.

With the state government withdrawing financial support to KSSPL, a special purpose vehicle created in June 2018 for ensuring prompt distribution of welfare pension to over 52 lakh beneficiaries in the state, uncertainty has gripped the firm’s future.

The government’s move, following an instruction from the Union finance ministry to account KSSPL’s debt as that of the government, will create a peculiar situation forcing creditors not to sanction more loans to the company as there is no repayment guarantee. This may lead to a situation disrupting welfare pension distribution.

“It’s only a technical order. There is no question of the government withdrawing support to KSSPL. What has now happened is dropping the legal mandate in this regard, which will give more flexibility to the company,” said a senior government official who preferred anonymity.

“Also, total debt doesn’t mean that the company has that much liability. Periodic repayments had been made from the budgetary assistance and from central allocation under the national social allocation programme,” said the official.

Economist V Nagarajan Naidu, who has done extensive research about Kerala’s public debt, said the revised GO relieving the state of the responsibility of repaying KSSPL’s loan wouldn’t stand legal scrutiny as the firm was an arm of the government.

Pension firm’s debt shocking, says ex-AG

“There are only government officials and ministers as directors of the company. The government can never orphan this company,” he said. KSSPL is headed by Finance Minister K N Balagopal and its registered office is Room No. 400 of finance department, government secretariat.

As per the CAG reports on the state’s finances tabled in the assembly, the total borrowings by KSSPL were Rs 6,843 crore in 2019-20 and Rs 8,604 crore in 2020-21. According to sources in the AG’s office, the KSSPL’s borrowings in the year of inception were Rs 6,700 crore. “The audit report for 2021-22 is yet to be tabled in the assembly. But, the borrowings for the year have overtaken the figure of the previous fiscal,” said a source.

The company spent Rs 10,036 crore for distributing pension to 52.27 lakh beneficiaries at Rs 1,600 per month in 2021-22. At least 90% of this was mobilised through borrowings. In the first quarter of this fiscal, the company might have taken a loan of around Rs 2,500 crore,” said the source.

Former accountant-general James K Joseph said the KSSPL’s debt figures are shocking. “We all thought KIIFB would turn out to be the worst burden on the state. It is not. Unlike KIIFB, KSSPL doesn’t have the support of a legislation to ensure annual income. Paltry allocation in the budget for social security pension won’t match the huge spending. These are serious issues,” James Joseph told TNIE.

The major creditors of KSSPL are a consortium of primary agriculture cooperative societies, KSFE, Bevco and Motor Workers’ Welfare Fund Board. “While 50% of the loan was availed from the consortium, KSFE funded 30%. The remaining is shared mainly among Bevco and a few welfare fund boards,” said James Joseph. According to Nagarajan Naidu, the guarantee provided by the government is a must for the company to raise further funds from institutions like KSFE.

“It will create trouble for the creditors as the anomaly of sanctioning loans without guarantee will be questioned by their internal auditors. The government needs to find an alternative plan like creating a pension fund for paying welfare pensions,” said Nagarajan. As on date, there are no arrears on social security and welfare pension payment and the government has cleared payment till May.

An exclusive S.P.V. for borrowings

KSSPL was incorporated on June 26, 2018
Paid-up capital of Rs 100 crore sanctioned from state’s plan fund in the 2018-19 budget
Objective: To act as special purpose vehicle (SPV) for payment of social security pension; to source fund on temporary basis from other sources; to act as umbrella body of various welfare fund boards to improve fund flow and utilisation.



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