Bringing temporary relief to Kerala, the Centre on Friday gave permission to the State to borrow ₹5,000 crore from the market on an ad hoc basis.
The State had been in talks with the Centre after the latter had put on hold the permission for market borrowings in the first quarter of the 2022-23 fiscal. The amount will be adjusted when the State's borrowing schedule gets finalised in due course.
Meanwhile, the Centre's stand on off-budget borrowings is likely to prove critical for the Kerala Infrastructure Investment Fund Board (KIIFB).
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.
