Kerala Faces Fiscal Crisis: Government imposes strict treasury control

The Government of Kerala has imposed strict controls on treasury transactions due to severe fiscal challenges. As a result, the Life Mission Housing Scheme is currently at a standstill, leaving many homeless individuals anxiously awaiting shelter. Reports indicate that the Government of Kerala is unable to allocate the state’s share of Rs 17,000 crore needed to complete the Jal Jeevan Mission, which aims to provide safe drinking water to all households. Additionally, roads in rural areas are in poor condition, highlighting the urgent need for infrastructure improvements. Recently, the Government of Kerala announced plans to issue bonds worth Rs 1,500 crore through an auction at the Mumbai office of the Reserve Bank of India through the E-Kuber platform. However, this comes alongside a notification from the Finance Additional Secretary imposing new restrictions on treasury transactions. Effective immediately, bills over Rs 5 lakhs will no longer be encashed, a significant reduction from the previous limit of Rs 25 lakhs. This change is expected to cause delays in the distribution of benefits across various departments. The notification also clarifies that the Rs 5 lakh limit applies to Local Self Government institutions. As these measures take effect, concerns grow about the impact on essential services and the welfare of vulnerable populations in the state. As a result, the state can only secure a loan of Rs 1,200 crore. The Finance Department is struggling to gather enough funds for next month’s expenses, including salaries. The Union Government had previously allowed the state to access a loan of Rs 4,500 crore, which enabled the disbursement of salaries, pensions, and bonuses during the Onam season. Planned activities typically begin in the second half of the fiscal year, and the current restrictions are likely to negatively impact these schemes. For the first time in history, the Government has imposed limits on discounting contractors’ bills due to a lack of funds for payments. Previously, contractors could receive 90 per cent of the amount from the bank, but now this has been reduced to just Rs 5 lakhs. This restriction also applies to contractors working with Local Self Government bodies. The Government is expected to pay these amounts to the banks later, but contractors will have to bear the interest costs for this arrangement. Also Read: Gujarat: Three Railway employees arrested for plotting to derail train in Surat Despite the restrictions on Onam celebrations and Tourism Week due to the Wayanad disaster, expenses for the Kerala Travel Mart have not been halted. It seems the Government is preparing for luxury and extravagance under the banner of “Keraleeyam.” In summary, the people of Kerala do not see any positive developments in the fiscal landscape.