Kerala FM demands loan repayment moratorium, grants amid pandemic-induced fin woes

Stressing that the state is facing severe financial problems, Kerala Finance Minister K N Balagopal on Thursday demanded a moratorium on repayment of loans, especially by small borrowers, immediate payment of GST compensation dues and grants worth over Rs 3,500 crore.

Kerala has also sought an increase in the state's borrowing limit to 5 per cent of the GSDP without any conditions and also raised concerns about the quantum of devolution of taxes collected by the Centre to the states.

The issues were raised during a meeting with Union Finance Minister Nirmala Sitharaman in the national capital on Thursday.

Addressing the media, Balagopal said the Centre should immediately pay the GST (goods and services tax) compensation dues.

Kerala has to receive GST compensation dues worth Rs 4,524 crore for the 2020-21 fiscal.

''The (financial) crisis the state is facing is very severe,'' the minister said as he emphasised the need for funds.

The state has also put forward the proposal that GST compensation framework, which is to end in July next year, should be extended for another five years.

Sitharaman said the pending dues would be given without much delay and that the request for extending the GST compensation framework would be considered, according to a release issued by the Kerala government.

The Centre understands the financial problems being faced by states due to the pandemic and efforts are being made by the Centre to address the issues, Sitharaman said, as per the release.

Balagopal said that many borrowers, including small-time traders, are having problems due to the pandemic and are unable to make repayments, adding that many are also facing harassment from entities that extended the loans.

According to him, small-time traders, farmers and labourers, among others, are facing a crisis situation due to the pandemic.

Small-time traders and borrowers are unable to repay their loans. The state government strongly demands that moratorium should be announced on repayment of loans, he noted.

There should be a moratorium on loan repayments at least till December. The RBI has to take a decision and the demand was put forward during the meeting with the Union finance minister, Balagopal said.

In the wake of the pandemic, in May, the Reserve Bank of India (RBI) raised the loan threshold limit permitted for restructuring under the Resolution Framework 2.0. It doubled the loan restructuring limits of struggling small businesses to Rs 50 crore from Rs 25 crore in view of the impact of the second wave of COVID-19 on such companies.

''With a view to enabling a larger set of borrowers to avail of the benefits under Resolution Framework 2.0, it has been decided to expand the coverage of borrowers under the scheme by enhancing the maximum aggregate exposure threshold from Rs 25 crore to Rs 50 crore for MSMEs, non-MSME small businesses and loans to individuals for business purposes,'' the RBI said in May.

Meanwhile, Kerala has also demanded sector-specific grant of Rs 2,412 crore and state-specific grant worth Rs 1,100 crore, the release said.

Among other issues was the demand for increasing the state's borrowing limit to 5 per cent of the GSDP without any conditions.

The state finance minister also said that the approach adopted for devolution of central funds for states was ''wrong'' and was adversely impacting states.

As per the 15th Finance Commission report, only 1.92 per cent of the central tax would be devolved for states like Kerala for the period from 2021-22 to 2025-26. This is a decline from 2.50 per cent.

The minister pointed out that it was not fair to reduce the devolution for states that have done well on development and controlling population growth.

The meeting was cordial. The Union finance minister has assured that action would be taken on all the issues raised and that she will visit the state after Onam for further discussions, the release added.

CPI(M)-led Left Democratic Front (LDF) came back to power in Assembly polls held in the state in April.