Home >Politics >Policy >To raise ₹10,500 crore, Kerala seeks hike in borrowing cap

Thiruvananthapuram: Flood-ravaged Kerala has asked the centre to raise its borrowing limit from the present 3% of state GDP to 4.5% as it looks to mobilise 10,500 crore for a mammoth reconstruction, part of what chief minister Pinarayi Vijayan described as a comprehensive plan to build a “new Kerala."

With receding water levels and rescue work nearly complete, Vijayan, during an interaction with reporters in Thiruvananthapuram on Tuesday, appeared calmer than in the past few days when the worst rains in a century killed hundreds, displaced more than a million and submerged large swathes of the state. Vijayan said Kerala will also impose a 10% cess in addition to GST on goods to raise money for relief and rehabilitation.

“The Cabinet decided to submit to the Central Govt a comprehensive plan that will enable the rehabilitation of the affected people and the rebuilding of Kerala. Our aim is not merely a restoration of the State to pre-flood times but the creation of a new Kerala," the chief minister’s office tweeted.

“The reconstruction demands mobilization of resources in a large way. The State will demand Centre to raise the ceiling on borrowing for the State to 4.5% of the GDP, which is pegged at 3% now. This will help to raise an additional Rs.10,500Cr from the market," another tweet said.

The government will also request the governor to call a special session of the legislative assembly on 30 August to discuss relief, rehabilitation and reconstruction.

Experts however said neither the Central Goods and Services (CGST) Act nor the State Goods and Services Acts has any umbrella provision to let states to impose a cess related to GST.

States may have to either approach the GST Council with a proposal for a cess linked to GST or opt for levying a cess not linked to GST. In the latter case, computation of the cess could be linked to a percentage of GST levied.

It’s not just Kerala -- raising the borrowing limit has been a key demand for many states that feel the present cap is a constraint on raising resources for development.

When the government led by Vijayan came to power in 2016, Kerala created a special purpose vehicle called Kerala Infrastructure Investment Board to get around the borrowing limit. The board aims to raise 50,000 crore in five years in loans from home and abroad for building social and physical infrastructure.

Kerala has a revenue deficit of 12,860 crore, or 1.7% of the state gross domestic product (SGDP). The state government has budgeted its total expenditure to rise 14% to 1.3 trillion in 2018-19. Kerala is the tenth largest economy in India and contributes around 4.2% to India’s GDP. Its SGDP growth rate was around 7.4% at constant prices in 2016-17.

Kerala has received 600 crore from the central government as emergency assistance so far, and about 200 crore from other states and a matching amount as private donations. It also hiked liquor taxes by 0.5% to 3.5% for 100 days last week to raise 230 crore.

Vijayan on Tuesday also demanded a 2,600 crore special package on central projects like MGNREGA. A special session of the state assembly will meet to discuss relief, rehabilitation and rebuilding of the state on 30 August, he said.

He said the decision to put a moratorium on bank loans in Kerala has been a major relief, but that this needs to be done for private non-banking loans too.

The United Arab Emirates Tuesday offered Kerala 750 crore, the latest in a series of significant donations from Gulf countries. People from Kerala have been working in Gulf countries for more than half a century, one of the oldest and longest migration patterns in India.

An estimated 10% of Kerala’s 30 million population lives and works in Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Qatar, Oman and Bahrain.

“Gulf countries are a second home to many Keralites. Malayalees not only form a major core of the labour force there, but has also made strong associations. They are willing to help us in a big way now," Vijayan said.

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