Kerala has urged the Centre to exclude the share of cost borne by it for acquiring the land needed for widening national highways from its annual borrowing limit.
The State has spent ₹5,580 crore so far on this account. But as this expenditure is made through the Kerala Infrastructure Investment Fund Board (KIIFB), the Union Finance Ministry has deemed it to be part of the State’s borrowing limit.
Finance Minister K. N. Balagopal, who met Union Finance Minister Nirmala Sitharaman in New Delhi on Saturday, informed her that this has resulted in a scenario where the State spends money on the land acquisition, but faces a cut in its annual borrowing limit because of it.
This is tantamount to “disincentivising” the State for supporting large capital projects and runs counter to the Union government’s policy of encouraging capital expenditure by the States, Mr. Balagopal said in his letter.
Mr. Balagopal pointed out that Kerala has earmarked resources for meeting 25% of the land acquisition cost of widening the national highways. Of the approved amount of ₹6,769 crore, the State has already spent ₹5,580 crore.
The development has come at a time when Kerala has been vociferously objecting to the Centre’s decision to treat ‘off-budget’ borrowings by KIIFB and the Kerala Social Security Pension Company Ltd (KSSPL) as direct debt of the State.
The Finance Ministry has been reducing ₹3,140.7 crore from the State’s annual borrowing ceiling each year since 2022-23 on account of the off-budget borrowing done through KIFFB and KSSPL during 2021-22.
In July this year, the State government had urged the Centre to allow it an ad hoc borrowing increase of 1% of the GSDP above the ceiling set for the 2023-24 fiscal and announce a special assistance package to overcome liquidity stress. The liquidity stress, Mr. Balagopal said, was aggravated largely on account of the cuts in the State’s annual borrowing ceiling for 2022-23 and 2023-24.
