Tax Revenue eases Pressure on Kerala Govt, State Treasury moves out of Overdraft but Still in Deficit

The recent surge in tax revenue has provided temporary relief for the cash-strapped state government, allowing the state treasury to exit its overdraft status. Prior to this, the treasury had been in overdraft for nearly a week, as per TNIE reports.

However, despite this improvement, the treasury still faces a deficit, necessitating continued restrictions on fund outflows. Specifically, cheques and bills exceeding Rs 5 lakh require clearance from the ways and means committee or prior approval from the finance department.

The financial situation is expected to improve only once the central government approves open market borrowings. Typically, the Centre grants borrowing approvals for the first nine months of the financial year in May.

Previously, the state had requested an ad hoc borrowing sanction of Rs 5,000 crore but was only granted Rs 3,000 crore, which has already been utilized. The gross borrowing limit for the current fiscal year is set at Rs 37,500 crore for the state.

Amid a severe economic crisis, Kerala's state finance department is tasked with raising Rs 9,000 crore this month for employees' collective retirement benefits. Despite rumors of a pension age increase, the government has not confirmed any changes.

Kerala has expressed concerns to the Centre about the undetermined loan limit for the first quarter of the financial year. The state has been in overdraft since earlier this month, facing significant financial strain. Although the budget announced that pension payments would commence from the current financial year, this has yet to happen. With approximately 16,000 government employees set to retire this month, around Rs 9,000 crore is needed for their benefits.

The Finance Department is hopeful that delaying the completion of pension procedures might provide some relief. Including welfare pension payments, arrears could extend up to six months. Amid the crisis, rumors of a pension age increase persist, but the Finance Department has clarified that no official discussions have taken place.

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