The State government is in talks with the Centre regarding nod for market borrowings this fiscal, even as the latter’s stand on off-budget borrowings is likely to prove critical for the Kerala Infrastructure Investment Fund Board (KIIFB).
Finance Minister K.N. Balagopal said on Friday that department-level talks were in progress with the Centre, which was yet to give its consent for market borrowings for the first quarter. The Minister said that the Centre had sought certain clarifications which were being provided by his department.
On the likely consequences of the Centre’s stand on off-budget borrowings on KIIFB, the Minister said that Centre was yet to make its final decision on the the issue known.
Centre’s stand
The Centre is insisting that off-budget borrowings by State public sector companies, corporations, special purpose vehicles and “’other equivalent instruments” be accounted in the state’s borrowing limit. Off-budget borrowings will be treated as borrowings made by the States themselves, according to the Centre.
In its monthly summary report for March, the Department of Expenditure, Ministry of Finance, observed that, “These off-Budget borrowings by the States have the effect of bypassing the Net Borrowing Ceiling (NBC) of the State by routing loans outside the State Budget through government-owned or companies/statutory bodies despite being responsible for repayment of such loans. Such borrowings have impact on the revenue deficit and fiscal deficit and thus have the effect of surpassing the targets set for fiscal indicators under State FRBM Act.”
State Assembly documents show that KIIFB has cleared 962 projects worth ₹70,762.05 crore till March this year.
In November, the Comptroller and Auditor General of India (CAG) also had directed the State government to include off-Budget borrowings by KIIFB and the Kerala Social Security Pension Ltd. (KSSPL) in the Budget and accounts. Increasingly resorting to off-budget routes is likely to lead the State into a debt trap, the CAG had noted.
Meanwhile, Mr. Balagopal swept aside speculations that the Centre’s tough stand on the State’s borrowing schedule was likely to affect salary payments in June. He termed such reports baseless, stating that the government had made arrangements in this regard.
