The Kerala Government has chosen to put aside its latest policy on prohibition to deal with its tattered finances, exposing its near-total dependence on alcohol excise.
It showed no qualms in drawing from the reserves of the State-owned monopoly distributor to tide over the latest ‘overdraft’ trap with the Reserve Bank of India.
Official sources confirmed on Wednesday that the Government has requisitioned Rs 300 crore in advance tax from the Kerala State Beverages Corporation.
The exchequer had emptied itself after a cumulative Rs 2,500-crore outgo in advance salaries, pensions and welfare payouts ahead of the Onam festive weekend.
The Government had also crossed the Rs 550-crore in Ways and Means Advances limit of the RBI that helps the State meet the temporary mismatch in cash flows.
This is what led to the overdraft trap on Friday in drawals over and above Ways and Means facility, and now rounded up to a figure ‘just below Rs 200 crore.’
But this has to be paid back within a stipulated period, and therefore the drawing of an emergency fund from the State Beverages Corporation.
MARKET BORROWING
Proceeds of the latest borrowing from the open market to the extent of Rs 500 would also become available today, followed by monthly revenue in value-added/sales tax.
But this would be only a temporary relief at best since salary and pensions outgo for the next month may create a crunch situation, likely forcing the Government to approach the market yet again.
It has already raised before the end of the first six months nearly half of what it is allowed to raise from the open market for the whole of the year.
This brings to light the dire situation in State finances in which salaries, pensions and welfare payouts eat up most of the funds available, leaving hardly anything for capital spending.
NOT FIRST TIME
Meanwhile, both Chief Minister Oommen Chandy and Finance Minister KM Mani, chose to make light of the situation saying ‘this too shall pass’.
While the Chief Minister held forth saying that the State had not done anything beyond what is well within its rights vis-à-vis the RBI, the Finance Minister said this was not the first time that the Government had gone into an overdraft.
In fact, the situation was worse in 2007-08 when it found itself in a Rs 1,540-crore trap during the Onam weekend, which had only repeated itself now but on a minor scale only.
Onam weekends have always been testing times since it meant advance payouts of salaries and pension and other expenditure, putting pressure on the exchequer, Mani said.