Kerala tightens spending as fiscal pressures continue despite change in government

Kerala has directed government departments to curb expenditure while preparing Budget Estimates for the next financial year as fiscal pressures persist. The state has also asked departments to avoid non-essential projects and tighten spending despite higher revenue receipts

Thiruvananthapuram: With Kerala’s finances continuing to remain under strain, the Finance Department has directed all government departments to strictly rein in expenditure while preparing Budget Estimates for the next financial year, underscoring that the State’s fiscal position has shown little sign of improvement despite a change in government.

In a circular issued as part of the Budget preparation process, departments have been instructed not to increase expenditure and ensure that revised estimates do not exceed the original budget estimates.

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Projects with no tangible economic benefit are to be avoided, while repair and maintenance works that can be deferred should be postponed.

Departments have also been asked to prepare realistic salary estimates and justify any expenditure that exceeds the previous year’s level.

Surplus employees need not be retrenched but may be redeployed to fill emerging vacancies.

Non-plan expenditure, excluding salaries, should not be higher than last year’s, while department heads have been asked to critically evaluate all schemes before including them in the Budget.

The circular further calls for a review of the need to retain temporary employees and seeks details of pending tax and non-tax arrears, the reasons for such dues, and the steps taken to recover them.

The move comes even as the State’s revenue receipts during the first quarter of the current financial year rose to Rs 33,311.21 crore over the corresponding period last year.

However, expenditure and borrowings have also increased, keeping the Treasury under pressure.

The financial squeeze is already being felt by local bodies.

Speaking to IANS, Thiruvananthapuram Corporation Mayor V.V. Rajesh said he had met Chief Minister V.D. Satheesan on Monday and explained the difficult financial position facing the civic body.

“As soon as the new financial year began, the then Chief Minister Pinarayi Vijayan reduced the plan allocation. The present government has also reduced the plan size, leaving the Corporation with a shortfall of nearly Rs 250 crore for the current fiscal while several months still remain. I explained the entire situation to the Chief Minister. He heard me patiently but did not indicate either way,” Rajesh said.

Rajesh created history in December by becoming Kerala’s first BJP Mayor after his party ended the CPI(M) led Left’s more than four-decade control of the Thiruvananthapuram Corporation.

Incidentally, one of the first decisions of the Satheesan government after assuming office in May was to release a White Paper on the State’s finances, which revealed that Kerala is burdened with outstanding liabilities of more than Rs 5 lakh crore, highlighting the scale of the fiscal challenge confronting the new administration.