Thiruvananthapuram: Kerala Chief Minister Pinarayi Vijayan has mounted a scathing attack on the Union government, accusing it of deliberately orchestrating a "financial strangulation" of the state by restricting its fiscal autonomy and undermining development initiatives.
Speaking to reporters on Wednesday, Mr Vijayan highlighted that the state’s capital expenditure efforts have faced sustained obstruction over the past five years. The primary contention remains the Centre's decision to retrospectively reduce Kerala’s borrowing limit from the 2021-22 fiscal year onwards, achieved by classifying loans taken by the Kerala Infrastructure Investment Fund Board (KIIFB) and the Social Security Pension Limited as direct state debt.
"Counting KIIFB guarantees as state debt is a flawed approach," the Chief Minister stated, noting that the Reserve Bank of India had distinguished between guarantees and loans as far back as 1999. He argued that the Centre’s current stance violates this established principle and is a "politically motivated" attempt to dismantle the state's development model.
Defending the LDF government’s fiscal discipline, Mr Vijayan pointed out that the state's net tax revenue had surged from Rs 47,000 crore in March 2021 to nearly Rs 80,000 crore currently. However, he argued that this internal efficiency was being negated by central interventions, including cuts to IGST settlements and delayed approvals.
The Chief Minister detailed specific financial setbacks, alleging that the Centre has arbitrarily slashed allocations, including a significant Rs 14,358 crore reduction in the borrowing limit for the upcoming 2025-26 fiscal year.
He also drew attention to external economic pressures, noting that international trade restrictions, particularly US import controls, have hit key sectors such as seafood, spices, cashew, and textiles, causing estimated annual losses of Rs 2,500 crore. "Despite these challenges, the Centre is weakening our fiscal capacity rather than supporting us," he said.
Mr Vijayan alleged that the Union government was misusing Article 293(3) of the Constitution to impose these restrictions. He further noted that a detailed memorandum regarding these grievances, submitted to Union Finance Minister Nirmala Sitharaman on October 9, remains unaddressed.