The COVID-19 pandemic is breaking the financial backbone of most of the state governments, which are facing rising expenditures and plunging revenues. At this difficult time, Kerala’s finance minister, the economist Thomas Isaac, told the independent senior journalist Anto T Joseph that the central government has not allotted any funds aside from the budgeted amounts to the states, nor has it allowed increased borrowing. The centre has given states “absolutely no additional money to fight the pandemic,” Isaac said. “It’s scandalous.”
The states’ struggle is compounded by the centre’s delay in paying the Goods and Services Tax compensation cess, Isaac said. The cess was instituted to help states make up for any loss of revenue due to the implementation of the GST, from when the GST laws were enacted in 2017, for a period of five years. Isaac said that the Kerala government plans to approach the Supreme Court, to compel the centre to pay. The finance minister said he will approach other finance ministers to back his decision.
Anto T Joseph: State governments are facing a tough time with their reserves fast depleting. How much is the drop in revenues due to the lockdown, in your assessment?
Thomas Isaac: Under lockdown conditions, our revenues will be about twenty percent of the normal. There is no GST revenue in lockdown, understandably. Then, we have stopped the lottery. All liquor shops are closed in Kerala. [There is] no sale of motor vehicles. And land transactions are virtually nil.
Even if [the lockdown] is relaxed, I expect the revenues to be half the normal, in the coming three months. For one, lockdown is going to be staggered. Two, easing the lockdown doesn’t mean things are going to get back to normal. I do not know what is going to happen to all the small companies that have folded up. Sectors like tourism are not going to recover any time soon.
State governments have no choice but to spend [right now]. They may have to cut other developmental expenditure and spend on health. My budget for [medical supplies] is Rs 400 crore, which may have been raised by another Rs 100 crore [under normal circumstances]. But now, I have already authorised expenditure of Rs 600 crore for equipment, medicine and so on. It has overshot the entire budget by 50 percent in the first month itself. The government provides free treatment to COVID patients and spends up to Rs 25,000 for ventilator for each person who is isolated after confirming the disease. You need personal protection equipment [PPE] kits which health workers keep changing every four hours and so on and so forth. This is the level of expenditure—it’s really huge. These are unusual times, you can’t rely upon the normal health budget.