‘No need for worries’, says FM; OD interest could go up to 10.5 pc
By CL Jose
THIRUVANANTHAPURAM/September 15-2022: Kerala received three days ago Rs2245.82 crore as the share of Central taxes and duties for August, being the 1.925 per cent of the Centre’s divisible pool for the month.
Centre updates every month the amounts thus distributed to the states in the previous month on different heads, the significant ones being the share of taxes & duties and Post Devolution Revenue Deficit (PDRD) Grant.
August saw a sum of Rs 1,16,665.72 crore being released by Department of Economic Affairs as share of Central Taxes and Duties to the states for the month, and this is the largest such release during the current financial year.
Kerala has so far received Rs6,117.15 crore until August as the share of Central taxes and duties.
Apart from the share of taxes and duties, Kerala received Rs1,097.83 crore for the month of August as the revenue deficit grant as recommended by the 15th Finance Commission. This adds up to Rs5489.15 crore up to August.
Kerala, which is the second largest recipient of the revenue deficit grant, after West Bengal, has a total entitlement to the tune of Rs13,174 crore for the full financial year on this count.
Talking to businessbenchmark.news, public finance experts said the receipts from the Centre for the month of August are sufficient to thwart the spectre of overdraft (OD), which the state is really keen to avert in the event of the Reserve Bank of India (RBI) pulling the plug on the ways and means (WMA) support.
However, the finance minister, KN Balagopal (seen in the picture), though hesitatingly, has debunked the fears expressed by the ‘detractors’ about the state of Kerala’s finances. He even justified the government plan to send a few ministers including the chief minister, Pinarayi Vijayan, abroad to learn the practices followed by those developed European countries.
OD is ‘expensive’
Rather than the disgrace the state would have invited in through the invocation of an OD regime, there is a price to pay for that facility as the RBI charges a ‘bit prohibitive’ interest rates on the fund thus released.
While the ways and means (WMA) attracts an interest rate in the range of 5.4 per cent to 6.4 per cent (5.4 per cent being the current repo rate), the interest charged on the overdraft (OD) facility could range from 7.4 per cent to 10.4 per cent, depending on the period the state’s exchequer is going to be on the ‘OD support’.
While the largesse given away by the government to its employees in the wake of Onam festival has been dubbed as the key reason for the current financial squeeze the state is going through, the Centre’s clampdown on the state’s borrowing programme could pose roadblocks in future spending going forward.
Moreover, the doing-away of the GST compensation and the downward adjustment in the state’s net borrowing ceiling (NBC) sought by the Centre on account of its off-budget borrowings through entities such as KIIFB and KSSPL have further exasperated the financial logjam the state is currently mired in.
