Centre may consider all-India cess for Kerala redevelopment, says state FM

Arun Jaitley, Kerala's Thomas Isaac discuss possibility of disaster cess on luxury items, other goods to fund natural calamities in Kerala and other states

The Union Finance Ministry may consider an all-India cess for the redevelopment of Kerala, which was devastated by the recent floods, said Kerala Finance Minister T M Thomas Isaac.

Speaking to Business Standard after meeting Finance Minister Arun Jaitley in New Delhi on Thursday, Isaac said that the Finance Minister told him that it will be difficult to have just one state levy cess for mobilising money, as it will create too many complications, He said the finance minister told him that the Center did not want to give up the principal of uniform tax.

During the meeting, Jaitley and Isaac discussed the possibility of having a disaster cess on a few goods, such as luxury items, to fund natural calamities in Kerala and other states.

On the issue of Kerala's demand to enhance borrowing limit, Isaac saud the state is looking at external borrowing of $1 billion from agencies like ADB.

Regarding the demand for raising the Fiscal Responsibility and Budget Management (FRBM) limits for borrowing he said, "They said we will look at your borrowing plan. In principle, it was accepted. The borrowing has to be in tranches of two or three years. The impression that I have after the meeting is that they will allow it for this year and will look into it for the next year. On both issues, they were quite creative and positive."

Isaac had earlier said that the Centre had not given Kerala the money sought to rebuild the state. Moreover, it wasn't even allowed to raise taxes and mobilise funds money from abroad. 

The state requires at least Rs 60 billion in revenue expenditure towards relief, compensation, repair and maintenance.

Kerala, which recently faced one of its worst floods in over a century, had asked the Centre for financial aid of Rs 22 billion towards rehabilitation work. The Centre granted Rs 6 billion.

The state had estimated that it would require over Rs 200 billion to rebuild.

As of August, Isaac said, the contributions to the Chief Minister's Distress Relief Fund had crossed Rs 10 billion and he expected it to cross Rs 20 billion.

Last month, Kerala Assembly had adopted a unanimous resolution appealing for greater central aid and sanction for accepting aid from foreign countries and multilateral agencies for relief and reconstruction.