The CPI(M) government of Kerala, facing an acute liquidity crisis, has made a new request for financial support from the Modi government. The state, which is suffering the brunt of the economic mismanagement of the Congress and Left governments, has asked for a special package of Rs 24,000 crore from the centre in the upcoming 2024-25 union budget.
The Kerala govt claims that it will overcome its financial crisis with the help of this package. Kerala Finance Minister K N Balagopal made the demand in a pre-budget meeting held in New Delhi on 22nd June.
Balagopal said that facing significant liquidity stress due to the aftermath of the Covid-19 pandemic and repeated floods. He claimed that the Kerala govt is finding it tough to manage its finances to meet its obligations due to factors such as reduced share from the divisible pool, lower revenue neutral rate post-GST implementation, cessation of GST compensation and Revenue Deficit Grants, and new restrictions on the borrowing limits.
The Kerala finance minister added that despite taking possible measures to enhance its own tax revenue and non-tax revenue, the state is “going through a very serious liquidity crunch”. He also claimed that Kerala is contributing towards aspects like start-up and innovation, human development index (HDI) and sustainable development goals (SDG) etc, and therefore it should be granted the special package of ₹24,000 by the centre.
“Considering the state’s contribution in varied spheres in keeping up the national pride which include but not limited to HDI, SDG, start up and innovation, a special package of at least Rs 24,000 crore may be announced in the Union budget 2024-25 to tide over the current liquidity stress by scheduling it over a period of 2 years from 2024-25,” he said in the meeting.
Kerala was one of the states that attended the meeting with other states prior to the presentation of the new government’s comprehensive budget. According to Kerala Finance Minister K N Balagopal, assistance should be provided to his state for a period of two years so that it can combat the economic downturn.
Kerala has also asked for Rs 5,000 crore in addition to Rs 24,000 crore for the development of Vizhinjam Port. Minister Balagopal said that apart from direct investment by the centre in the port project, centre should grant ₹5,000 to the state govt so that the state govt can fulfil its part of the development of the port along with the surrounding region.
The finance minister also requested another ₹5,000 crore for other infrastructure projects like a Tunnel Road link between Calicut and Wayanad. He also requested the centre for an early clearance of the semi-high-speed railway project Silverline.
Kerala has further requested permission to borrow more money from the market in order to help the state’s Left government cover its expenses. The state’s financial collapse has also been attributed to its inability to borrow. Kerala has also made other requests from the centre, aside from this.
Just one month ago, the centre granted Kerala relief of Rs 21,253 crores after which the state has asked for another economic aid of Rs 24,000. The Modi administration allowed Kerala govt to borrow an additional amount of Rs 21,253 crores in May. The relief will continue till December 2024.
Karnataka also demanded a package of Rs 11,000 crores
Congress-ruled state Karnataka, which spent Rs 52,000 crores on election guarantees in the financial year 2024-25, is also seeking a special package of Rs 11,000 crores from the central government. Congress-led Karnataka has asked the Modi administration to release Rs 11,495 crore for the state. Karnataka recently hired an American agency to increase the state’s revenue. for an amount of Rs 9.5 crore for a period of 6 months.
The Congress government has already used the Rs 11,000 crore fund released earlier for SC/ST (Scheduled Castes/Scheduled Tribes) to reduce the financial strain caused by free schemes in the state. It has also recently started considering a rise in the price of water and bus fares. The Congress government also recently increased the price of petrol and diesel in Karnataka.
