KERALA is facing a harsh discriminatory approach from the BJP-led government at the centre. Because of this prejudiced attitude of the centre, Kerala is experiencing a serious financial crisis. The Modi government seems determined to thwart the LDF government’s development agenda by strangulating its finances.

Centre-state relations are structured in an asymmetrical fashion. The centre has all the major powers to raise resources while the states are required to undertake development and social welfare expenditure that far exceed their revenue generating capacities. While this is a common problem for all states, Kerala is being singled out for exceptional treatment by denying it its due share of taxes and resources. Some instances of this can be cited.

The central government has reduced the amount of funds that can be borrowed by Kerala in the last quarter of 2019-2020. As per the budgetary allocation, the loan should have been Rs 10,233 crore. But only Rs 1,900 crore has been sanctioned. Instead of the Rs 19,500 crore received as borrowing in the last fiscal, it will just be Rs 16,602 this year. In the place of the Rs 3,200 crore loan received in the last quarter of 2018-19, Kerala will get only Rs 1,920 in the last quarter of 2019-20.

There is constant delay in receipt of GST compensation. The GST compensation for the month of December has not been received. It is estimated to be Rs 1,600 crore. Kerala had received Rs 6,866 crore in the last three months of 2018-19. However, it is estimated to get only Rs 4,524 during the same period this year.

Shockingly, Kerala did not receive flood compensation given to seven other states despite facing floods in August 2019. An additional central assistance of Rs 5,908.56 crore was granted to seven states from the National Disaster Response Fund (NDRF) for damages during the southwest monsoon in 2019, but not Kerala.

Kerala has been one of the better performing states in implementation of the rural employment guarantee scheme (MGNREGS). However, the centre has been tardy in sending funds and arrears to the tune of Rs 1,215 crores which are pending. For payment of paddy procurement also there are dues of Rs 1,035 crore.

The union budget for 2020-21 has further neglected and done injustice to Kerala. The 15th Finance Commission in its recommendations for 2020-21 has reduced Kerala’s share in the net proceeds of taxes to 1.94 per cent from 2.5 per cent recommended by the 14th Finance Commission. Even the recommended amount of tax devolution by the commission (Rs 16,616 crore) has not been allocated in the budget. The state’s share in central tax has been proposed at Rs 15,236.6 crore as against Rs 16.401 crore received in 2019-20.

The allocation for revenue deficit grant is lesser than the current year’s allocation. The 15th Finance Commission has recommended an amount of Rs 74,340 crore as revenue deficit grants for all states. But in the budget only Rs 30,000 crore has been allocated for post-devolution revenue deficit grants. This will affect Kerala badly.

While the fiscal deficit of the central government for 2019-20 is 3.8 per cent which is beyond the prescribed limit under the FRBM Act, Kerala is disallowed an exemption in enhanced borrowing limits even during a crisis.

The Modi government’s violation of federal norms and hypocrisy in talking about cooperative federalism is very much on display when it comes to its dealings with Kerala.

The LDF government and the people of Kerala are not going to take these efforts to denigrate their state lying down. They will struggle to assert their rights.
(February 5, 2020)