In the run-up to Onam, Kerala seeks nod for ₹6,000 cr. additional borrowing, restoration of deducted sums

Ahead of the Onam season when government spending sees a spike, Kerala has approached the Union government seeking permission for ₹6,000 crore additional borrowing in 2025-26 and restoration of  sums deducted on various counts.

Finance Minister K.N. Balagopal placed the State’s requirements before the Centre during a meeting with Union Finance Minister Nirmala Sitharaman in New Delhi on Monday. Mr. Balagopal wanted the Centre to allow the State to borrow ₹6,000 crore over and above the Net Borrowing Ceiling (NBC) for 2025-26 on account of having borne 25% of the land acquisition cost for national highway development.

Further, he urged the Centre to restore ₹3,323 crore clipped from its borrowing ceiling in the name of the Guarantee Redemption Fund (GRF). He also requested the Centre to release ₹1,877.57 crore, originally sanctioned to Kerala in 2023-24 on account of variations in Gross State Domestic Product (GSDP), but subsequently adjusted from its grow borrowings for 2024-25.

In addition to these, Kerala also wanted the Centre to restore ₹965.16 crore deducted in April 2025 on account of an advance apportionment made by the Centre to make up for a shortfall in the Integrated Goods and Services Tax (IGST) balance.

“In view of the significant impact these deductions have on the State’s fiscal health and its ability to meet essential expenditures especially in view of huge cash outflow in connection with the upcoming Onam festival, your prompt intervention and favourable consideration of above requests are highly solicited,” Mr. Balagopal said in a representation to Ms. Sitharaman.

Mr. Balagopal said Kerala should be permitted an unconditional additional borrowing of ₹6,000 crore over the NBC for bearing 25% of the land acquisition cost for NH development. Although this expenditure was met by the State through borrowings, it was deducted from the annual borrowing limit of the State. Kerala wanted this amount to be considered an additional capital expenditure by the State government.  

On the GRF deduction, he pointed out that Kerala had constituted the GRF and annual contributions at the rate of 1% for the next five years were slated to commence in the current quarter. He also noted that the IGST adjustment of ₹965.16 crore had adversely affected the resource position of the State.

Mr. Balagopal also observed that while Kerala’s fiscal indicators had improved on account of the State’s efforts to increase its own revenue and expenditure management, restrictions on its borrowing limits and decline in Central share of resources remained “primary concerns.”