Thiruvananthapuram: The revenue-starved state is recklessly pushing itself towards a treasury shutdown by December. Even after borrowing Rs 2,200 crore from the open market during the last one month for Onam-related expenses, the state still went in for ‘ways and means’ advance of Rs 100 crore on September 5 from the RBI as the borrowings were found inadequate.
‘Ways and means’ advance is resorted to when the state finds itself short of funds to meet its daily expenses. The state can annually borrow up to Rs 350 crore in this manner without any conditions.
However, when the borrowing crosses the limit, the state slips into overdraft. If the state continues in overdraft for 14 consecutive working days, the RBI will cease all treasury operations. Salaries and pensions, as a consequence, will be frozen.
All the Rs 2,200 crore borrowed since August, which should have exclusively been utilised to finance development activities, had gone into meeting non-development expenditures like salaries and pensions during Onam.
But in the first four months of this fiscal from April, the state has used up Rs 6,900 crore of its borrowings, more than half the annual limit of Rs 13,200 crore this fiscal. “Intriguingly, the state has not achieved even one-tenth of its plan fund utilisation,” former finance minister Dr T.M. Thomas Isaac said.
With virtually all the borrowing channelled into non-development activities, the state has been left with scanty funds for development. Diversion of development funds is mainly the result of falling revenues. Though a 25 percent tax growth was expected this fiscal, the state has not been able to achieve even a 10 percent growth.
Top finance department officials anticipate two possibilities: either the state will have to drastically cut down its plan expenditure of Rs 20,000 or blindly slip into overdraft and, within no time, into a treasury ban.
If a treasury shutdown has been avoided for the time being, it is because the state has abdicated some of its crucial responsibilities. “Salaries and employee pensions might have been paid but not welfare pensions. No money has been spent on asset maintenance either. The miserable condition of our roads is proof,” tax expert Jose Sebastian said.
