Extend GST support by 5 yrs, lift cap on borrowings: Kerala to Centre

Kerala has presented a 20-point wish list, including compensation for the loss of GST revenues; support to carry out countercyclical fiscal measures; lifting the annual borrowing ceiling, to be considered by the Central government in the forthcoming Union Budget 2022-23.

Presenting the State’s case at the pre-budget meeting called by Union Finance Minister Nirmala Sitharaman in Delhi on December 30, Kerala finance minister K N Balagopal has said that many of the points raised by the state apply to other states of the country too. The first in the list of demands was a policy decision to extend the period of GST compensation for five more years, due to the poor GST collection by the state due to Covid-19. The minister wanted the Centre to compensate the loss of revenue from central transfers due to a cut in inter share. Stating that Kerala has lost ₹6400 crore from the last award year of the 14th finance commission to the first year of the 15th finance commission, due to the reduction in revenue share from the divisive pool, he wanted the state to be adequately compensated.

Rationalising cess and surcharge levied on petrol and diesel; lifting the annual borrowing ceiling of the state; keeping external borrowings from multilateral and bilateral agencies to be kept outside the state’s normal borrowing ceiling was sought.

Enhancement of state’s allocation under centrally sponsored schemes was another suggestion made by Kerala. Specifically, the minister wanted National Health Mission to be made a 100% centrally sponsored scheme, instead of the current 60:40 percent sharing arrangement. Fund release for such schemes every quarter was also demanded.

On enabling states to go for countercyclical measures, the minister has asked for a special assistance package in the Budget to support such measures by the state governments in their endeavour to stimulate the economy.

The minister also wanted the budget to announce financial incentives and public technology procurement for unit manufacturing products for the space industry. “Kerala can become a hub for space manufacturing given the location of ISRO’s satellite and launch vehicle fabrications (that are done in Thiruvanthanapuram)”, Balagopal has said.

The capital incentive for health-related industries such as medical devices and vaccines for communicable diseases was another recommendation made by the minister. State-specific package to rejuvenate the agriculture and small-scale sectors; special assistance for universal MNREGA; income tax exemptions to cooperative societies; a separate package for return migrants, and front-loading of capital expenditure needed to implement a semi high-speed rail project were among the other demands made by the minister.