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The Kerala government has decided to raise Rs 1,000 crore, for the second time this year, through sale of ten-year bonds for meeting development spending.
The state government would raise the amount leveraging the auction platform of the Reserve Bank of India (RBI), to be held on March 10. It had mobilised Rs 1,000 crore in February in a similar manner.
According to sources, the state government, facing financial turbulence, had mobilised more than Rs 10,000 crore through the sale of ten-year bonds in the current financial year.
While the state finance department in its notification had said the funds raised would be utilised for development activities, the sources said it was likely they would also be utilised for meeting salaries and pensions of government servants.
Kerala is facing a serious financial crunch as the growth in tax collection had dropped to 10-12 per cent in the last three years, as against a growth of 22 per cent witnessed in 2009-10.
There are allegations the drop in tax collection has been due to deliberate attempts of tax evasion. Also, the finance department had been issuing stay orders on pending tax payments, citing various reasons.
Reports indicate due to legal challenges, the state government has not been able to collect pending tax dues worth Rs 3,000 crore.
Kerala will present its Budget on March 13 even as the Opposition parties are strong on blocking finance minister KM Mani from presenting the Budget. This is his 13th Budget as finance minister.
According to government sources, the state has a total debt of over Rs 100,000 crore. Meanwhile, alongside Kerala, 19 other states will opt for bonds to raise funds on Tuesday. According to an RBI press statement, a total Rs 15,510 crore will be raised.
