Kerala govt may dip into Gods own funds to fix overdraft crisis

Written by M Sarita Varma | Thiruvananthapuram | Updated: Feb 27 2014, 23:53pm hrs
KERALAKerala, God's own country, may have to dip into the almighty's kitty to bail itself out of a financial crisis. (AP)
Kerala, God's own country, may have to dip into the almighty's kitty to bail itself out of a financial crisis.

With month-end commitments of salaries, pensions and interest payments piling up, the state government is staring at an ugly overdraft situation, forcing it to either seek help from the state-run Devaswom Board or the cash-rich State Beverages Corporation.

Kerala is entitled to market loans worth Rs 12,000 crore, but this has been drawn nearly to the hilt, sources in state finance department told FE.

"To face the overdraft crisis, the options will be to utilize the revenue-flush Kerala Devaswom Board or the huge tax pool from the State Beverages Corporation," a senior official said, adding that the state government had tried tapping the welfare boards, which were sitting on cash reserves.

The welfare boards for unorganised sectors are said to have turned down the fund pleas.While Kerala urgently needs at least Rs 4,000 crore this week, the balance in state treasury has thinned painfully to a bare Rs 1,000 crore.

Almost all temples in Kerala (except a few such as the Padmanabhaswamy temple where a huge gold treasure was unearthed recently) are managed by the Devaswoms. Run by the state, these Devaswoms collectively earn about Rs 1,000 crore per year.The Guruvayoor temple alone contributes Rs 450 crore a year to the Devaswom Board revenues.

With an average of 12 lakh bottles of IMFL being sold every day, State Beverages Corporation, the sole distribution arm of IMFL in Kerala, is equally in a position to give a leg up to the treasury. With sales turnover of nearly Rs 9,000 crore per year, translating to Rs 7,240 crore in tax inflows, the corporation is Kerala's big money-spinner.

The treasury crisis has also hit the plan funds substantially. The plan expenditure schedule laid down by the state planning board, setting 30 % expenditure each in the first two quarters of the current fiscal and 40 % in the third quarter, has gone awry. With the general elections coming up, Kerala is weak on the political will to realise the Rs 10,000-crore commercial sales tax arrears.

"Revenue mobilisation is a tough task when the sales tax machinery is yet to be free from corruption," said Jose Sebastian, chairman of the expenditure rationalisation committee. Kerala FM K M Mani refused to acknowledge there was a serious financial crisis. "There was a revenue crunch, mainly due to the overall economic slowdown in the country and the world, in general. There is no grave crisis that cannot be tided over.