The Centre will exclude ₹3,140.70 crore from the State’s borrowing limit for the current fiscal. However, Finance department sources said this offered only a temporary relief as the amount would be deducted in two equal instalments in the coming two fiscals.
Minister of State for External Affairs V. Muraleedharan, in a Facebook post, pointed out that the measure was intended as a “temporary relaxation” in the repayment of off-budget borrowings.
The ₹3,140.70 crore constitutes the current year’s instalment of the net off-budget borrowing of ₹12,562.80 crore made by Kerala in the 2021-22 fiscal which is being deducted from the borrowing limit in four instalments. Kerala had repeatedly objected to the deduction terming it unfair.
Direct borrowings
In 2021-22, Kerala had declared gross borrowings by the Kerala Infrastructure Investment Fund Board (KIIFB) and the Kerala Social Security Pension Ltd (KSSPL) to the tune of ₹14,312.80 crore. The Centre told the States in March 2022 that such borrowings would be deemed direct borrowings made by them, a stand which Kerala has vehemently opposed. Kerala had also objected to the Centre’s decision to implement this decision with “retrospective effect,” that is, applying it to borrowings made in 2021-22.
The Centre fixed Kerala’s net off-budget borrowing in 2021-22 at ₹12,562.80 crore, by allowing a ‘replacement borrowing’ of ₹1,750 crore for repayment on off-budget borrowings.
A touchy issue
The open market borrowing (OMB) limit has been a touchy issue in Centre-State relationships due to the Centre’s position on off-budget borrowings. For 2023-24, Kerala’s OMB has been fixed at ₹29,136.71 crore. Out of this, the Centre has already issued consent for borrowing ₹23,852 crore so far, Union Finance Minister Nirmala Sitharaman had said while replying to a question in the Lok Sabha on December 4.
