‘March Freeze’ confirms state coffers empty

 The virtual non-spending in March is shocking because it is the month when the outflow has traditionally been the highest for a fiscal. What’s more, experts had always been worried about the bunching of expenditures in the last quarter. 

But this March, the opposite happened; spending just ceased. “This has never happened in the history of the state. The state has simply refused to spend,” former finance minister Dr T. M. Thomas Isaac said. 

“The burden of arrears will fall on the ongoing fiscal,” he added. 

The ‘March freeze’ is also confirmation that the state’s coffers are  empty. The lowest-ever plan fund utilization of 66 percent for the 2013-14 fiscal further emphasises the crisis. Not a single paisa was disbursed to the local bodies during March. 

No money was released for demand-driven projects like MGNREGA either. Consumption, as a consequence, was affected. 

It is the money to the local bodies and the purchasing power in the hands of the lower income sections that boost economic activity. 

“The economy of the state has been deprived of at least Rs1,000 crore last March,” a top finance expert said. This was reflected in the feeble growth in tax collection during March, a mere 7 percent; yet another sign of depleting revenues.

Symptoms of impoverishment were already evident. The state government has kept the leave surrender and provident fund advance bills of employees in abeyance. 

It also made the unprecedented move of going in for open market borrowing, at an unusually high interest rate of nearly 10 percent, right in the first week of the new fiscal.

Welfare pensions and contractor liabilities were not paid. “Even a second tranche of open market borrowing will not be enough to meet the salary and pension commitments,” said Mr Gopan Mukundan of Sasthra Sahithya Parishad.