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Kerala Finance Minister K.N. Balagopal has written a letter to Union Finance Minister Nirmala Sitharaman, seeking urgent intervention by her in the backdrop of the grave financial crisis that the state government is facing currently.

"The financial health of the state has been seriously affected by a reduction in the revenue deficit grant to the tune of around Rs. 7,000 crore this year and loss due to stoppage of GST compensation of around Rs. 12,000 crore. In addition, the Ministry of Finance has arbitrarily, in the name of off-budget borrowing, made a reduction of approximately Rs. 4,000 crore in the net borrowing limits of the state," says Balagopal.

He points out that, in all, the state government will have to contend with a reduction of Rs 23,000 crore in the financial resources available to it for financing the budget in the current financial year.

"This poses a serious threat to the government in sustaining spending on welfare schemes for the poor, including housing, education and health among others. Unless the realities faced by the state, particularly given the fact that the state is struggling to emerge from the economic debilitation wrought by the Covid pandemic, are recognised by the Union Government, the safety of the socio-economic security system that the state has worked so hard to build over the last several decades will be in jeopardy," says Balagopal.

He goes on to point out that the composition of the financial liabilities of State Governments has changed significantly in the last 25 years. "The share of loans and advances from the Centre has declined from over 15.8 per cent of all state liabilities in 2005 to 3 per cent in 2020. Kerala is no exception to this trend. The outstanding loans and advances from the Centre to Kerala as a percentage of state's total liabilities have reduced from 12.4 per cent in 2005 to 3.3 per cent in 2020," says Balagopal.

He further points out that over the last five years, some of the actions of the Union Ministry of Finance while fixing the state's net borrowing ceilings has raised some grave concerns for the state governments and seeks the immediate attention of the Centre.

According to those in the know of things, if there is not going to be a considerate approach to the felt demands and needs of the state with regards to the fears and concerns of Balagopal, the coming months could see the state reeling for want of funds.