Breakfast diplomacy works, Centre sanctioned additional borrowing of Rs 5,990 crore to Kerala
THIRUVANANTHAPURAM: The Kerala government’s measured move to involve the governor in its parleys with the Centre appears to have paid off with the Union finance ministry sanctioning an additional borrowing of Rs 5,990 crore to the cash-strapped state.
The approval is based on the state government’s request for additional borrowing space on account of different factors, including the Centre’s “miscalculation” of the state’s public account accruals.
The state finance department received the communication on supplementary borrowing on Thursday evening, a day after Chief Minister Pinarayi Vijayan hosted a breakfast meeting with Union Finance Minister Nirmala Sitharaman in New Delhi.
In an unprecedented move, Governor Rajendra Vishwanath Arlekar had joined Pinarayi in an attempt to convince Sitharaman of Kerala’s financial requirements.
The permission has come as a big relief for the state, which is facing a tough time managing the substantial financial year-end payments. With this, Kerala’s borrowings in the current financial year will cross Rs 42,000 crore. The state had requested additional borrowing space for power-sector reforms and to rectify the error in miscalculation of public accounts.
In 2022-23, the Union government adopted a new methodology to calculate the net borrowing ceiling (NBC) on states for market borrowings. Accordingly, the three-year average of the net accrual in public accounts of a state was considered to calculate the eligible amount. This average amount was deducted from NBC. The method adversely affected Kerala’s borrowing space as the state had higher accumulations in public accounts in the preceding years.
Kerala had urged Centre to do away with new system
Kerala had urged the Union government to dispense with the new system and to consider the previous year’s actual in the public accounts. The Centre accepted this and informed the state that the previous year’s particulars from the AG will be considered for estimating public account accruals.
Accordingly, the AG’s figures were submitted to the Union government. The state government requires about Rs 30,000 crore to meet the outgo at the end of the year.
Pinarayi raised the state's concerns at the meeting with Sitharaman. Kerala had raised the issue of “miscalculation” of NBC at the pre-budget consultation convened by Sitharaman. The issue also figured in Kerala’s petition questioning the Centre’s restrictions on the borrowing power of state governments.