Kerala Finance Minister K N Balagopal has written to Union Finance Minister Nirmala Sitharaman, urging that the state is in financial distress because it has not received Rs 12,000 crore in GST compensation.
"The state's financial health has been severely harmed by a reduction in the revenue deficit grant of around Rs 7,000 crore this year, and also a loss of almost Rs 12,000 crore due to the suspension of GST compensation. Furthermore, the Ministry of Finance has arbitrarily reduced the State's net borrowing limitations by around Rs.4000 crores in the guise of off-budget borrowing. Overall, the State Government will face a decrease of Rs 23,000 crore in financial resources available to it for budget financing in the current fiscal year "Balagopa stated in his letter dated July 22.

Kerala's finance minister told Sitharaman that the financial crisis was threatening the continuance of welfare programmes for the poor, such as housing, education, and health care. Unless the Centre recognises the reality confronting the state, particularly in the aftermath of the Covid pandemic, the safety of the socio-economic security system that the state has fought so hard to construct over the previous many decades will be jeopardised, he added.

"The structure of state governments' financial liabilities has shifted dramatically during the previous 25 years. The Centre's proportion of total state liabilities has fallen from more than 15.8 percent in 2005 to 3 percent in 2020. Kerala is not immune to this trend. The outstanding loans and advances from the Centre to Kerala State as a percentage of total liabilities have decreased from 12.4 percent in 2005 to 3.3 percent today. He said.  The Kerala finance minister went on to say that while the stated goal was to fix the net borrowing ceiling for states, Article 293(3) of the Constitution was being exploited to undermine their independence and financial autonomy.

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