Kerala Finance Minister KN Balagopal on Friday strongly criticized the Centre’s conditional loan of Rs 529.50 crore sanctioned under its capital investment scheme for the rehabilitation of landslide-hit areas in Wayanad. The loan, which comes with a stringent condition to utilise the funds by March 31, has been labelled as impractical by the Kerala government, as the tight deadline poses a significant challenge to the state's ability to carry out large-scale rehabilitation efforts.

KN Balagopal pointed out that while the loan was under the “Scheme for Special Assistance to States for Capital Investment 2024-25,” it was essentially a long-term loan, not a grant. He stressed that Kerala had not received any grant, which would typically be provided in disaster situations. Instead, the state is being tasked with repaying this loan despite the urgent need for rehabilitation work following the devastating landslides that struck Wayanad last year.

Balagopal’s Concerns on the Loan Conditions

The Finance Minister specifically highlighted that the loan’s condition required the amount to be forwarded to the implementing agencies within 10 working days. If there is any delay, the state would be liable to pay interest on the loan at the weighted interest rate of the previous year’s open market borrowings. According to Balagopal, “What we received was not a grant; it is a loan of Rs 529.50 crore under the CapEx scheme. It is a long-term loan that must be repaid. However, it must be utilised very quickly, which is one of the loan's conditions. That poses a huge practical problem.”

Despite these challenges, Balagopal affirmed that Kerala would proceed with the rehabilitation work and would communicate the practical difficulties to the Central Government. He added that although the loan came late, once all necessary clearances were received, the state would begin with the first phase of rehabilitation, which would include building a township.

Opposition Leader V D Satheesan Criticizes the Loan Terms

V D Satheesan, the Leader of Opposition in the Kerala Assembly, also criticized the loan’s impractical conditions. In a Facebook post, Satheesan stated that providing a 50-year interest-free loan for 16 projects, with the condition that the funds be utilised by March 31, was an unfair expectation. He argued that the Central Government was effectively “mocking” the people of Wayanad, who had lost their lives and livelihoods in the landslides, by imposing such tight conditions.

Satheesan further condemned the Centre’s stance, claiming that while other states had been granted financial assistance after natural disasters, Kerala was denied a special financial package. He said the **Centre’s actions undermined the federal structure of India’s Constitution, as the state rightfully deserved Rs 2,000 crore for rehabilitation, not a loan. He went on to warn that the UDF (United Democratic Front) would mobilise public support against the Centre if the issue wasn’t resolved.

The Centre’s Financial Obligations and Loan Conditions

The loan granted to Kerala comes with several stringent conditions, including the stipulation that the funds must not be parked and must not be used for capital projects already approved under the scheme. Furthermore, any changes to the specific projects for which the loan has been sanctioned will require prior approval from the Centre.

State government sources have clarified that using the loaned amount for purposes other than its intended use will result in a reduction in the state’s tax devolution in subsequent years.

Delayed Loan and the Need for Immediate Assistance

One of the major points of contention is the delayed arrival of the loan. Balagopal stated that while the loan was critical for rehabilitation efforts, it should have been provided much earlier to allow for a more effective and timely response to the crisis in Wayanad. The delay has only added to the pressure on the state’s ability to meet the loan’s conditions.

Wayanad Landslides and the Need for Rehabilitation

The Wayanad region was severely affected by landslides in July 2024, which claimed over 200 lives and wiped out entire villages. The state government’s efforts for rehabilitation were further hampered by the lack of timely financial assistance from the Centre. The CBI and other political entities in Kerala have been critical of the Centre’s handling of disaster relief for the state, arguing that Kerala deserves better treatment under India’s federal framework.

Conclusion: Growing Frustration Over Centre’s Approach

As the March 31 deadline for utilising the loan approaches, there is growing frustration in Kerala over the Centre’s approach to disaster relief. The state government, led by Chief Minister Pinarayi Vijayan, and opposition leaders have repeatedly expressed dissatisfaction with the Centre’s decision to provide a loan instead of a grant.

The UDF has already threatened to mobilise protests if the Central Government fails to rectify its stance on Wayanad’s rehabilitation, while the LDF government is focused on fulfilling the rehabilitation tasks, despite the immense financial pressure.

This issue has brought to light the challenges of coordinating disaster relief efforts in India, especially when the terms for such assistance are seen as impractical and burdensome. The future of Kerala’s rehabilitation depends largely on the Centre’s willingness to reconsider its position and support the state in its time of need.

The Upcoming IPOs in this week and coming weeks are Royalarc Electrodes Limited, Tejas Cargo India Limited, Quality Power Electrical Equipments.

The Current active IPO are  L.K. Mehta, Shanmuga Hospital, PS Raj Steels, Voler Car, Maxvolt Energy, Hexaware Technologies.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.

Join our Finance Saathi Telegram Channel for Regular Share Market, News & IPO Update.