Harmful Central financial policies will deprive the State of about ₹23,000 crore in the current fiscal compared to 2020-21, a situation which could seriously hobble the State’s ability to fund welfare and development schemes, Finance Minister K. N. Balagopal informed the Assembly on Thursday.
Presenting a statement in the House which sought to raise ”certain crucial issues for protecting Constitutional values and federal structure,” Mr. Balagopal blamed the Narendra Modi government of using Central agencies such as the Comptroller and Auditor General (CAG), Enforcement Directorate (ED), and Income Tax department to further its own interests and curtail the fiscal powers of the State.
Mr. Balagopal’s statement came on the heels of the latest Comptroller and Auditor General (CAG) report on the State finances criticising the government for its ‘off-budget borrowings’ through the Kerala Infrastructure Investment Fund Board (KIIFB) and Kerala Social Security Pension Ltd. (KSSPL), and the ED issuing a summons to former Finance Minister T.M. Thomas Isaac regarding KIIFB’s open market borrowings.
Mr. Balagopal said the State’s financial health had been gravely affected by the Central decision to reduce ₹7,000 crore fiscal deficit grant and discontinue the Goods and Services Tax (GST) compensation of about ₹12,000 crore.
Further, the State will suffer a reduction of ₹3,578 crore in its borrowing capability this year due to the decision to consider the guarantee provided to KIIFB and the KSSPL as State debt. This will see ₹14,000 crore accounted as State debt, Mr. Balagopal said.
In addition to this, the borrowing limit of the State had been brought down to 3.5%. All these were bound to affect the State’s spending on welfare schemes and sectors such as housing, education and health as envisioned in the State Budget, he said.
Mr. Balagopal accused the Centre of attempting to weaken welfare and development activities in the State by targeting KIIFB and the KSSPL. It should be suspected that the CAG’s report for the year ended March 2020 (tabled in the Assembly in November 2021), which contained several ‘‘irrational observations,’‘ was meant to undermine the fund mobilisation capabilities and branding of KIIFB, he alleged.
Although the Assembly decided to reject the unconstitutional and technically flawed observations in the report, the Union Finance Ministry had used it as a reason to obstruct the functioning of KIIFB and the KSSPL. In the future, such policies could affect welfare activities, including the LIFE Mission housing programme, he said.
Mr. Balagopal alleged political motives of the Centre behind the summons issued by the ED to KIIFB officials and, more recently, Dr. Isaac. ”It is a matter of concern that the information regarding the summons was leaked to the media even before KIIFB received them,” he noted.
He indicated that he was planning to write a ”detailed letter” to Union Finance Minister Nirmala Sitharaman highlighting the issues affecting the federal financial structure.
Mr. Balagopal’s statement was made in accordance with Rule 300 of the Assembly Rules of Procedure and Conduct of Business which permits a Minister to make a statement on a matter of public importance with the consent of the Speaker.
