Kerala’s Finance Minister Thomas Isaac said the Centre has proposed that the Goods and Services Tax Council explore the possibility of a national cess to help the flood-ravaged state find resources to rebuild its infrastructure, The Indian Express reported on Friday.
Isaac said the Centre will also tweak rules to allow Kerala to borrow beyond the mandated limit. The state finance minister met Union Finance Minister Arun Jaitley on Thursday – their first meeting after the state was hit by floods in August.
“The Union finance minister said that the GST Council should explore the possibility of an all-India cess to help states like Kerala in times of need,” Isaac said. “It will be discussed in the GST Council. This will be for a stipulated period…all states will contribute.”
Isaac said Jaitley pointed out two “problems” in changing GST laws to permit levying a cess to raise funds for reconstruction that the state had demanded earlier. “One, a cess for a particular state goes against the principle of a single tax,” Isaac said. “Also, the present software may not accommodate such a cess.”
Isaac said Jaitley had also agreed “in principle” to allow Kerala to borrow beyond the mandated limit during the process of reconstruction. “He [Jaitley] has been mediating discussions on borrowing from World Bank and ADB [Asian Development Bank], as well as other international agencies,” Isaac said. “The key issue is whether additional borrowing should be above the normal borrowing of the state. No state has been given permission for it.”
In August, the state proposed to raise Rs 10,500 crore by requesting the Centre to increase the borrowing limit from 3% to 4.5% of the gross state domestic product.
“But the finance minister was very positive that a means should be formed to give special accommodation to states in crisis,” Isaac said. “He did not give the nod for a radical increase in borrowing limit because there is no time to spend either. It can be tweaked in the future, of course… How it can be done will be discussed later.”
Isaac, who described the meeting as “fruitful and cordial”, said he had not discussed the row over accepting foreign aid. “The Kerala government and the Ministry of External Affairs will discuss it later,” he said. “The stalemate continues on it.”
The Centre said it would not accept offers from foreign governments to assist in relief and rehabilitation efforts in the Kerala floods after Chief Minister Pinarayi Vijayan said the United Arab Emirates had offered Rs 700 crore assistance.
The state government has projected Rs 30,000 crore to rebuild – Rs 20,000 crore for capital expenditure and Rs 10,000 crore for revenue expenditure. Isaac said the Rs 20,000 crore includes investment for reconstruction of roads, canals and protecting sea walls.
At least 483 people died in the state in rain-related incidents this monsoon. During the worst phase of the flooding in August, there were 14,50,707 people living in relief camps.