The Kerala government has raised a “federal invoice” to Prime Minister Narendra Modi demanding the payment of Rs 5,783.69 crore in pending arrears to the state. Terming it the “fiscal strangulation of a performing state,” Kerala’s Department of Finance alleged that a state that pays its own way is being denied the funds that it is constitutionally entitled to.
Kerala posed four major questions to the BJP-led Union government under Prime Minister Modi:
According to the state, Kerala generates 72.84% of its revenue, when the national average is 57.77%. The state also generates 59.71% of its tax revenue, as opposed to a national average of 49.55%. However, the Finance Department said that “despite outperforming the national average in revenue generation, Kerala faces the sharpest cuts in tax devolution and borrowing limits.”
In a detailed release involving graphic representations of the state’s rightful funds being withheld, Kerala said that its tax share collapsed by 37%, falling from a 3.05% to 1.92%. “This is not a fluctuation; it is a structural demotion of the state’s financial standing,” the state said. Moreover, the state alleged that its revenue deficit grants were unilaterally cut despite 15th Finance Commission assurance that said otherwise, and Rs 965 crore was forcibly seized from state accounts in the name of IGST recovery.
A breakdown of the Rs 5,783.69 crore pending:
Among the issues raised by the state are the Union government’s move limiting the state’s borrowing capacity, including infrastructure loans through KIIFB. Other complaints include funds withheld for agriculture schemes, denial or blocking of funds meant for education schemes, withholding of health and nutrition contributions, and underfunding of welfare schemes and MGNREGS.
Kerala also alleged that the Union government left the state to fend for itself in times of crisis, like the 2018 flood and the 2024 Wayanad landslides.
The Kerala government also accused the Modi government of carrying out an administrative blockade, by delaying or indefinitely blocking legislations through the Governor, the Union making laws on state subjects like agriculture and cooperatives, and bypassing state authority in the administration of universities.
It also cited the example of the Life Mission Scheme, which faced a roadblock when the Union government demanded that boards of the Pradhan Mantri Awas Yojana (PMAY) be put up outside homes built under the housing scheme. Notably, Kerala spends Rs 4 lakh per house on the ‘Life’ scheme. Of this, PMAY allocates Rs 72,000 in rural areas and Rs 1.5 lakh in urban areas. The Modi government prioritises branding over beneficiaries, the state alleged.
Kerala is set to go to polls in April 2026, and “fiscal strangulation” of the state is a complaint the ruling CPI(M) and the opposition Congress have consistently raised against the BJP-led Union government.