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Kerala seeks more central grant

With severe financial strain on the exchequer, Kerala asked the Centre not to go ahead with further tightening of overdraft and ways and means advances taken from the Reserve Bank of India and sought more grants than loans from plan assistance to states.

Pointing out that the state was facing a "difficult" financial situation, Kerala Chief Minister A K Antony also asked the Centre to consider debt-swap by either swapping the high cost loans with new ones at 10 per cent interest or take interest stream on the high costs loans and convert it into a long 15-year loan at seven per cent interest.

"Further tightening of the scheme for regulating overdraft and ways and means should not be contemplated," he said in New Delhi at the chief ministers' conference, chaired by Prime Minister Atal Bihari Vajpayee.

He said implementation of the Fifth Pay Commission, which doubled the state's salary bill and led to a decline in share of central taxes, had created a huge burden of committed expenditure, leaving the state with very little access to resources for funding development activities.

Kerala's fiscal deficit was Rs 3,039.97 crore (Rs 30.40 billion) with a revenue deficit of Rs 2,535.64 crore (Rs 25.36 billion) in 2001-02.

Considering the need for funds, Antony said the pattern of Plan assistance needed a revision and that "mere routing of funds to the consolidated fund of the state for Centrally Sponsored Schemes will not help the state government."

He said the plan pattern, which is 70 per cent loan and 30 per cent grant, may be revised as 50 per cent loan and 50 per cent grant with effect from this fiscal.

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