- Amendment of Act allows guarantees at 10 pc of GSDP vs 5 pc
- Due to the Centre’s intransigent stand on the borrowing ceiling, the state has borrowed only below Rs20,000 crore as of November end, 2022.
Talking to myfinpoint.com recently at his office in Thiruvananthapuram, the Finance Minister, KN Balagopal said, the government guarantees have reached 10 per cent of the state’s Gross Domestic Product (GDP).
“On government guarantees, we have reached the ceiling of 10 per cent of the GSDP. Though the ‘Kerala Ceiling on Government Guarantee Act 2003’ had mandated only up to five per cent of the GSDP, we amended the Act recently to raise the limit to 10 per cent of GSDP (FY22), which works out to approximately Rs80,000 crore,” the finance minister explained.
Government guarantees include the guarantee given by the State Government on behalf of the Government departments, public sector undertakings, local authorities, statutory boards, corporations and cooperative institutions.
The guarantee Act allows the government to charge a minimum of 0.75 per cent per annum as guarantee commission, which ‘shall not be waived under any circumstances’.
The issue of state government guarantees made headlines last year after the Centre stated that the government guarantees should be regarded as off-balance sheet borrowings of the state.
Further, the Centre insisted that these amounts are integral part of state’s official borrowings while considering the net borrowing ceiling (NBC) of the state.
Importantly, this has in turn required the state’s Finance Ministry to prune the size of borrowings substantially from about Rs46,000 crore originally estimated in the 22-23 (FY23) budget, on account of guarantees, primarily due to the borrowings of Kerala State Social Security Pension Ltd (KSSPL) and Kerala Infrastructure Investment Fund Boar (KIIFB) during 2021-22.
Due to the Centre’s intransigent stand on the borrowing ceiling, the state has borrowed only below Rs20,000 crore as of November end, 2022 compared with Rs41,773 crore during the same period last year.
Until the Finance Minister revealed the size of the state guarantees, the market estimate on such guarantees was at about Rs35,000 crore only mainly because even the CAG’s ‘Accounts at a Glance’ for November 2022 has showed it at about Rs34,000 crore due to the lag in updation of accounts in many government-related entities.