Kerala says Centre obstructing development in state, ruining it financially

The Centre is attempting to obstruct development activities in Kerala and push it into financial ruin by their fiscal policies, which limit the borrowing capacity of the state and through the Enforcement Directorate (ED) probe into the financial dealings of KIIFB, the LDF government claimed in the assembly on Wednesday.

Kerala Chief Minister Pinarayi Vijayan said that while borrowings by government-run entities like Kerala Infrastructure Investment Fund Board (KIIFB) were being included in the debt of the state to limit the loans that it can avail from the open market, the Centre at the same time was not disclosing all the loans availed by PSUs like NHAI, Air India Holdings and Indian Railways Finance Corporation.

This "discriminatory" stand of the Centre was evident from a recent report of the Comptroller and Auditor General (CAG) which said that the central government has not fully disclosed the huge loans availed by the NHAI, Air India Holdings Ltd and the Indian Railways Finance Corporation, the CM said in the assembly.

"So the central government is taking a stand that they can do it, but we cannot do so," Vijayan said.

The state Finance Minister K N Balagopal too blamed the Centre for Kerala's financial constraints.

He said that the Centre cut down the state's share in the divisive pool and also limited its borrowing capacity by including loans availed by entities like KIIFB in Kerala's debt.

Besides that it also reduced the tax on 250 luxury items from 28 per cent to 18 per cent, which resulted in loss of GST revenue to the state, but no benefit to the consumers as the prices of the luxury goods only went up further, the minister noted.

Due to the reduction of GST on luxury items, the state received 12,500 crore less as GST compensation, Balagopal claimed.

He pointed out that in order to improve the financial position of the state, the opposition should join the ruling front in opposing the Centre's policies which 'interfere' with the fiscal federalism of the country.

Balagopal said that the Centre for the first nine months of this financial year has permitted the state to borrow around Rs 17,000 crore from the open market, but at the same time added about Rs 14,000 crore to the state's debt as the off-budget borrowing by KIIFB.

The state has indicated its objection to the same to the Centre, the minister said in response to queries regarding KIIFB and the ED probe against it.

Balagopal alleged that the ED probe for alleged FEMA violation by KIIFB was an attempt to derail development in the state as 'masala bonds' were issued by the Board to get funding from abroad with the approval of RBI.

He claimed that NHAI and various other central entities have also issued masala bonds in the past to raise thousands of crores of funds, but no such action has been taken against them by ED.

Leader of Opposition (LoP) in the state assembly V D Satheesan said that the Congress and the states ruled by it and its UPA partners would oppose the Centre's such fiscal policies.

However, the Centre's fiscal policies were not the only reason for the financial problems in the state as it sat idle waiting for GST compensation when it could have tried to take measures to prevent loss of tax revenue from gold.

He said gold has been smuggled into the state in huge quantities which has resulted in loss of tax revenue.

The Kerala government has been alleging for the past several months that the Centre's fiscal policies are choking the borrowing capacity of the southern state to push it into financial ruin.