Kerala faces borrowing uncertainty as deadline approaches

THIRUVANANTHAPURAM: Kerala is facing uncertainty about a crucial loan approval from the Centre just days before the financial year ends. The state is looking to borrow Rs 6,250 crore, but the Centre's decision is expected by Monday. Without this approval, Kerala risks losing these funds. The government is preparing to enforce Treasury controls if the approval doesn't come through. Starting Monday, any cheques over Rs 1 lakh from various departments will be subjected to a queue system. This is a shift from previous plans, which limited queue delays to bills submitted only from the 26th onward. Now, there are concerns that some bills might remain unpaid until the end of March. As part of ongoing power sector reforms, states are allowed to borrow an extra 0.5% of their Gross State Domestic Product (GSDP). Kerala has taken advantage of this in previous years and is eligible for the Rs 6,250 crore this year. However, the approval from the Centre is still pending. Tuesday marks the last chance for Kerala to raise funds through bond issuance via the Reserve Bank of India (RBI). This requires prior nods from both the Centre and the RBI. The Finance Department had hoped to receive the needed approval by Friday. If everything goes well on Monday, there is still hope for the bond issuance with special permission from the RBI. Otherwise, the missed opportunity could impact Kerala's financial plans. Overall, Kerala had aimed to use these additional borrowings to cover this year’s expenses. After December, the state informed the Centre it could borrow Rs 12,000 crore. So far, Rs 5,990 crore of these loans has been approved and utilized. This financial year, Kerala has borrowed a total of Rs 47,517 crore from the open market.