The Central government has announced suspension of new bankruptcy filings on loan defaults for one year and raised the threshold for insolvency.

Kerala Finance Minister welcomes Centres move to raise borrowing limit of states
Coronavirus Finances Monday, May 18, 2020 - 07:56

Kerala Finance Minister T M Thomas Isaac on Sunday welcomed the Centre's move to raise the borrowing limit of the states and wanted the GST component to be given in full.

The Central government had earlier today announced suspension of new bankruptcy filings on loan defaults for one year and raised the threshold for insolvency as it moved to ease COVID-19 pain for the industry.

It also announced a new policy for companies under state control saying public sector undertakings under the non-strategic sector will be privatised while those in the identified strategic sector would be capped by not more than four by merging some of them.

"We welcome the announcement made by Union Finance Minister Nirmala Sitharaman to raise the borrowing limits of states for the financial year 2020-21 from three per cent to five per cent of GDP. This was one of the demands made by Kerala," Isaac told reporters here.

In the fifth and final tranche of the economic stimulus package, the Finance Minister raised allocation for employment guarantee scheme by Rs 40,000 crore over and above the Rs 61,000 crore budgeted earlier for MGNREGS, to provide employment to migrant workers moving back to their states.

Isaac said the state has an estimated revenue loss of over Rs 35,000 crore due to the COVID-19 pandemic.

"The estimated revenue loss for Kerala due to COVID-19 is around Rs 35,000 crore. Now the centre has raised the borrowing limit now raised to 5 per cent and still we will get only about Rs 18,000 crore. This is only half of our loss and hence we demanded that the GST component for the states be given in full," he added.

The Kerala Finance Minister said the expenditure for health sector needs to be increased in order to improve its functioningand added that the state has some disagreements with the decision onimposing any conditions on loans sought.

"The 15th Finance Commission had taken up the suggestion that loans should not be bound by conditions.

However, this was not considered this time in its finance report. The loans granted to the states need to be repaid with interest and what's the point in imposing conditions for the loans. Either these conditions should be scrapped or there should be discussion on that," Isaac said.

He said thestate has no disagreement with implementing the 'One Nation One Ration Card' system or improving the ease of doing business.

"However, Kerala cannot implement the announcements made today in the name of ease of doing business. Today's announcement completely destroys the public sector. Such suggestions are not acceptable," he added.

He also said it was not possible to implement the announcements made with regard to the power sector.

Isaac, however, welcomed the additional allocation of Rs 40,000 crore under the Mahatma Gandhi National Rural Employment Guarantee scheme (MGNREGS).

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