Kerala Budget 2026 Highlights: New tax slab for low-alcohol beverages, EV road tax reduced; Rs 600 cr for Indira free travel scheme

As part of its push toward technology-led governance, the Kerala government has announced plans to integrate artificial intelligence and real-time analytics into administrative decision-making, with the goal of making spatial intelligence a core component of governance alongside traditional physical infrastructure. To support this digital transformation, the state will establish a dedicated corpus fund aimed at driving technological modernization across departments. In a significant boost to the information technology sector, the budget also proposes a major upgrade of the Cyberpark in Kozhikode. The government intends to develop the facility on par with the state's premier IT hubs—Infopark in Kochi and Technopark in Thiruvananthapuram—thereby fostering a world-class technology ecosystem in northern Kerala and promoting the decentralization of IT investments and employment opportunities. Announcing the initiative, Chief Minister Satheesan stated, "Kozhikode Cyber Park will be upgraded to the standards of Infopark Kochi and Technopark Thiruvananthapuram."

Leader of the Opposition in the Keralam assembly, Pinarayi Vijayan, on Friday, alleged that the state government's Budget proposals indicate an "attempt toward privatization," claiming that key development initiatives are being designed to benefit private players and undermine public assets. Reacting to the first Budget of the UDF government for the financial year 2026-27 presented by Chief Minister V D Satheesan, Vijayan said there was a systematic move to hand over key sectors to private interests."By accepting the central government's ideas, there is an attempt toward privatization. There is a move to hand over Keralam's coastline to the private sector. The Southern Keralam Economic Corridor and Rare Earth and Critical Mineral Corridor are part of this," he said.

A new tax slab has been introduced for low-alcohol beverages and road tax on electric vehicles will be reduced to encourage cleaner mobility in Kerala.

In the healthcare sector, the Kerala government announced the launch of the "One Kerala Care Mission", under which eligible beneficiaries suffering from illnesses will receive assistance. A dedicated Department for Senior Citizens has also been allocated Rs 10 crore for its functioning.

Emphasising the need to adapt to social and economic changes, CM Satheesan said the government would focus on senior citizens' welfare while exploring new avenues for economic growth.

Kerala Budget today allocated around Rs 600 crore towards Indira guarantee of free travel for women on the KSRTC buses in state. Satheesan highlighted the welfare measures already undertaken by the UDF government despite financial constraints.

Kerala Chief Minister VD Satheesan, who also holds the Finance portfolio, on Friday (June 19) presented the revised Budget for 2026–27 in the state Legislative Assembly, pledging to build a "New Kerala" with inclusive growth and sustainable infrastructure development.

CM Satheesan said, "The White Paper was presented by this government before the people in order to make the people aware of the actual financial condition of the state, including unresolved commitments and financial liabilities, and to lay the foundation for a transparent and accountable economic recovery strategy. Steps will be taken to comprehensively reform the current mode of functioning of KIIFB by appointing an expert committee. If the salary revision of employees, which is going to be implemented in July, is carried out and the leave surrender benefit is restored, the government will have to undertake even greater liabilities than this. Without increasing the plan allocation, the previous government, in order to exaggerate the plan expenditure, included the accounts of KIIFB and certain public sector institutions in the plan expenditure without adding them to the Budget Estimate under the actual plan accounts. This wrong trend created a situation in which the actual facts of expenditure were not reflected and, by itself, pushed an already weak financial condition into a deeper crisis. The possible reduction in expatriate remittances due to the West Asian conflict, and the inflation caused by changes in fuel prices, have further aggravated the state's financial crisis. Taking all these into account, this government's first budget is being presented."

Thiruvananthapuram and Kozhikode light metro projects to be implemented. An amount of Rs 20 core has been earmarked for the preliminary works. The Kochi-Perumbavoor-Aluva corridor will be developed as a Global Furniture Hub. An allocation of Rs. 10 crore has been made. Kochi-Thrissur belt will be developed as a gold manufacturing corridor. The government proposes a Global Gold Hub. Rs 10 crore has been earmarked.

"We are committed to creating a ‘Puthuyuga Keralam’ that will improve education and the healthcare sector using modern technology," says CM VD Satheesan.

The government's call for fiscal restraint is backed by the white paper, which flags outstanding liabilities exceeding ₹5 lakh crore and pending payments approaching ₹49,000 crore. It notes that core expenses—salaries, pensions and interest—absorb most revenues, constraining room for new infrastructure and development spending. The future of the Kerala Infrastructure Investment Fund Board (KIIFB) is likely to be a flashpoint in the Budget debate, with the white paper saying the body needs major restructuring amid about ₹21,000 crore of loan liabilities and roughly ₹35,000 crore of projects awaiting funding.

The UDF’s remaining Indira Guarantees are set to shape much of the Budget’s political and financial debate. Expected measures include monthly assistance of ₹1,000 for college-going girls, family health insurance coverage up to ₹25 lakh under the proposed Oommen Chandy Health Insurance Scheme, and interest-free loans of up to ₹5 lakh for young entrepreneurs and small businesses to spur self-employment. The campaign pledge to raise social welfare pensions to ₹3,000 a month—announced by Congress MP Rahul Gandhi—remains central. With the state’s fiscal room limited, observers will watch whether these commitments are funded in full, rolled out in phases, or redesigned to fit tight budgetary constraints.

Kerala CM VD Satheesan has signalled that the state budget will reflect the 'new govt’s vision' even as the administration struggles to find money to execute its development agenda. Speaking ahead of the Budget on June 17, he said he was preparing it “under severe financial constraints” and that it would require arranging an additional Rs 20,500 crore to implement a plan worth around Rs 35,000 crore that was presented by the previous Left government in January 2026. Describing the challenge as “almost a miracle,” he said, “I have the impossible task of pulling off a miracle,” adding that resources would have to be mobilised on a significant scale if planned development projects were to proceed.

The budget is widely expected to formally implement the UDF election pledge to raise social welfare pensions to Rs 3,000 per month. Officials are also tipped to roll back the controversial Rs 3 fuel cess, which would provide widespread relief. In addition, female college students are likely to receive monthly financial assistance of Rs 1,000.

The upcoming Kerala state budget is expected to tackle the long-pending pay revision that concerns more than 5.23 lakh state employees and about 4.5 lakh pensioners. The last revision took effect in 2019 and a fresh revision—due in 2024 under the five-year cycle—remains unresolved. Although the government set up the 12th Pay Commission in February, the panel completed its term in May without submitting recommendations, leaving salary and pension increases uncertain.