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In a clear attempt to overcome depleted financials, Kerala is set to mobilise Rs 1,000-crore through the sale of 10-year securities for the second time in a gap of just 14 days.
Prior to this, on April 9, the state has raised Rs 1,000-crore through this route. The auction of securities worth Rs 1,000-crore will be conducted on the Reserve Bank of India’s core banking solution (E-Kuber) system on April 22.
This is for the first time the state government took a loan to the tune of Rs 2,000-crore in the first month of the financial year. Along with Kerala, 11 state governments are going for fund mobilisation through the sale of securities aggregating Rs 8,416-crore.
West Bengal will mobilise the maximum of Rs 1,800 crore, followed by Andhra Pradesh with Rs 1,500 crore and Maharashtra Rs 1,100 crore.
Tamil Nadu and Uttar Pradesh also will raise Rs 1,000 crore each.
In the midst of weakening financial situation, Kerala had delayed salary and pension disbursements to its staff for Mar 2014 by 5 -15 days. Pensions under various welfare schemes have not been fully disbursed for the financial year 2014.
The state’s commercial tax collections dropped roughly 5 per cent in the financial year 2013-14 while there was a sharp fall in the land registration revenues. There isn’t much improvement in the tax collection in the new financial year too as the advance taxes were collected in March.
Kerala is offering the highest annual interest rate of 9.62 per cent under the drive. It requires Rs 2,800–3,000 crore for meeting the salary and pension disbursement target for April 2014.
The state finance department faced a vehement attack from the Opposition and the issue was raised in the Lok Sabha election campaign.
However, the state managed to tide over the tight situation by transferring the funds of various departments in the commercial banks to the treasury as an ad hoc measure. This helped manage disburse the salary in the first week of April itself. But the pension and other payments were delayed indefinitely.
Finance minister KM Mani earlier said the state was not reeling under serious financial crisis, but was facing a revenue crunch. He said the financial position of the state was not ‘critical’ and the sharp rise in revenue and fiscal deficits was due to the general economic slowdown. This has hit the revenue receipts in the first month of the current financial year. However, the government intends to follow a tight expenditure strategy and proposes to explore more revenue generating avenues, he said.
The total debt of the state increased by Rs 24,611.69 crore during the last couple of years.
According to Thomas Issac, former state finance minister, there is a serious fall in the growth of tax collection during the last financial year. He told Business Standard the average growth had dropped to 10.5 per cent from 19.5 per cent during his term.
He said the state managed salary disbursement in April through advance tax collection from the Kerala State Beverages Corporation and petroleum distributing companies. Hence, the revenue collection for April is rather low, leading to a grave financial position.
The government has no other way to disburse the salary for the month of April. There is anarchy in the treasury management of the state, he added.
Government-owned corporations including the Kerala State Road Transport Corporation (KSRTC) are facing a serious financial crisis due to non-payment of government grants. As a result, around 36,000 former employees of KSRTC are yet to get their pension for the past four months.
