Our financial concerns arise from declining central transfers: Kerala FM

Kerala finance minister K N Balagopal says the state’s share of grants and tax devoltions from the centre has been decreasing with successive Finance Commissions’ recommendations. In a telephonic interview with Sneha Sasikumar, he talks about how the state has been augmenting this shortfall through its own revenue sources, its social sector programmes, and vision on pension. Edited excerpts:

 

What prompted the Kerala government to announce a hike in social security pension along with launching other welfare schemes, given the state’s financial restraints?

 

Our financial concerns mainly arise from the sharp decline in our share of Central transfers. Of all states, we have received the lowest share of income from the Centre in the last four to five years.

 

During the 10th Finance Commission, Kerala received about 3.81 per cent of the total central tax devolution. This was later reduced to 2.5 per cent, and under the 14th Finance Commission, it declined further. It declined very sharply to 1.92 per cent in the 15th Finance Commission period. Because of this, just before the latest Finance Commission came into effect, the annual revenue loss to Kerala was around ₹8,000- 9,000 crore and that’s just for one year.

 

When the second Pinarayi Vijayan government assumed office and I took charge as the finance minister, grants and special grants from the Union government amounted to around ₹31,000 crore. This has now fallen drastically to just ₹7,000 crore.

 

Out of every ₹100 of total revenue  of the state, Kerala now receives only  ₹25 from the Centre, while the average is ₹53 at the all-India level. If Kerala were to receive its fair and justified share, there would be no financial constraints or deficiencies.

 

Despite this, you announced new social welfare schemes and hiked an existing one?

 

The new schemes are primarily aimed at expanding welfare coverage. Let’s take the ‘Connect-to-Work Scholarship’ first. This scheme is designed to support educated youth who are waiting to enter the job market. It targets those who have completed plus two, industrial training institute (ITI), diploma, or degree courses and are currently unemployed. The scholarships are provided based on income criteria. 

 The Sthree Suraksha Pension also has an income criterion. It is a scheme we are in the process of implementing, and around 3-3.5 million women are expected to come under its ambit. It focuses on women who are not beneficiaries of any existing welfare schemes. Both schemes are intended to ensure that the benefits reach the most deserving sections of society.

 

How is the Kerala government managing its finances?

 

We are  improving our own income sources. The state’s own tax revenue has increased from ₹47,000 crore in 2020-21 (FY21) to an expected ₹90,000 crore in the current financial year (FY26). Similarly, non-tax revenue, which had fallen to around ₹7,000 crore in FY21, is projected to rise to ₹18,000 crore in FY26.

 

Are you also looking to rationalise the new pension system (NPS) for Kerala government employees by switching to the unified pension system (UPS), as announced by the centre? 

 

Yes, the government is considering a unified pension framework to make the process more transparent and efficient. We have already formed a sub-committee and held several meetings on this issue. Based on those discussions, once we fully understand the Centre’s position, we will be able to move forward. Our demand is clear, we want a unified pension system. But of course, this also depends on various existing obligations and categories of pensioners.

 

November 1 will mark a historic milestone with Kerala becoming the first Indian state to be declared free from extreme poverty. But the state’s assessment of extreme poverty is based on multidimensional  parameters. How would the state fare if one takes the $3 per day extreme poverty line on the  purchasing power parity basis as framed by the World Bank?

 

Yes, we followed certain criteria for this. Kerala has made remarkable progress on all these fronts, and the initiative reflects the government’s sustained focus on ensuring that no one is left behind, whether in housing, food security, or access to healthcare.

 

The Vision 2031 framework identifies port-led growth as a major driver of Kerala’s development. What specific fiscal or policy measures are being taken to attract private investment in this sector?

 

Not just in the port sector, we are promoting private investment across industries. We have made it easier for startups to access finance at lower interest rates and have simplified procedures for entrepreneurs. Specifically in the case of ports, we are focusing on developing the Kollam, Pathanamthitta, and Thiruvananthapuram districts as major growth centres. For this, we have allocated ₹1,000 crore from the Kerala Infrastructure Investment Fund Board (KIIFB) for the implementation of the Vizhinjam-Kollam-Punalur Industrial and Economic Growth Triangle Project.

 

The government is also introducing land pooling mechanisms and promoting public–private partnerships (PPPs) for infrastructure development. With strong connectivity and improved road infrastructure, we can ensure faster movement of goods even from distant regions. These initiatives are being implemented with a long-term vision.

 

The state government continues its engagement with the Adani group in the Vizhinjam Port project despite allegations against the conglomerate. How do you justify this partnership?

 

The government’s cooperation with the company continues because the project is already in an advanced stage. We are not giving any undue advantage to anyone, but rather ensuring that the public interest is protected. The government’s role is to ensure transparency and accountability in such large-scale projects.