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Financial crisis grips Kerala as the state fails to get loans, Pinarayi Vijayan govt considers deferring salaries of govt employees

As there are not enough funds, the Kerala government is reportedly considering setting aside almost 10 per cent of salaries for the current month.

Kerala, often hailed by the ‘left-liberal’ establishment as the best state in the country, is inching closer to a dire economic crisis that may lead to deferred salaries of government employees, reports Mathrubhumi.

According to the reports, the Pinarayi Vijayan-led Communist government in Kerala is facing its worst economic crisis as the state has no funds to provide salaries to its government employees.

Reportedly, Kerala had requested the union government to lend Rs. 4,000 crore to finance their expenditure. However, the union government has not taken a call on whether to lend money to Kerala as the state government is previously accused of ‘miscalculating’ its previous borrowings.

As there are not enough funds, the Kerala government is reportedly considering setting aside almost 10 per cent of salaries for the current month. However, Finance minister KN Balagopal has claimed that such matters relating to deferring salaries are not under consideration at present.

Besides the fund crunch to provide salaries to government employees, the Kerala government is also facing heat from the Kerala State Road Transport Corporation (KSRTC) as they protest against the Pinarayi Vijayan-led government for failing to provide salaries on time. The KSRTC is in a deep financial crisis, and the trade unions are protesting against the government for the delay in disbursing salary.

The financial situation in Kerala is such that the state government has imposed restrictions on the treasury. The Finance department had issued orders placing restrictions on the treasury from clearing bills over Rs. 25 lakhs.

Union govt has paused funds over miscalculation of its previous borrowings

The union government is delaying the permission to borrow more money considering there are issues in the statements of previous years. The CAG had said that borrowings of the Kerala Infrastructure Investment Fund Board (KIIFB) and the Public Service Undertakings should also be accounted for in the government’s balance sheet. But the Kerala government has opposed such a move. The union government has also sought an explanation on the utilisation of the additional loan permitted during the Covid-19 lockdown.

According to the RBI calendar, the state had already made arrangements for borrowing Rs 1,000 crore on April 19, Rs 2,000 crore on May 2 and another Rs 1,000 crore on May 10. However, the union government’s permission was delayed.

As per the Union Finance Ministry, Kerala is eligible to borrow up to Rs 32,425 crore. Usually, this is permitted at the beginning of the financial year itself, in instalments through bonds issued by the Reserve Bank of India and additional loans from banks.

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