White Paper exposes Kerala’s Rs 5.07 lakh crore debt crisis

The White Paper on Kerala’s Finances titled “Kerala’s Fiscal Health: A Status Report” has officially revealed that the state’s total public debt has escalated to Rs 5.07 lakh crore.

Tabled in the State Legislative Assembly by Chief Minister and Finance Minister VD Satheesan, the document outlines a severe fiscal crisis inherited by the newly elected United Democratic Front (UDF) government from the previous Left Democratic Front (LDF) administration.

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The report, compiled by a three-member expert committee chaired by former Cabinet Secretary KM Chandrasekhar, highlights acute fiscal distress.

Beyond the main debt, the state faces Rs 48,733 crore in pending liabilities and deferred bills, including unpaid Dearness Allowance (DA) and Dearness Relief (DR) for employees and pensioners.

Roughly 77% of total revenue receipts are entirely consumed by committed expenses like salaries, pensions, and interest payments.

Interest payments alone absorb 20.9% of the state’s total revenue, meaning one out of every five rupees earned goes strictly towards debt service. Development and infrastructure funding has dropped to just 1.3% of the Gross State Domestic Product (GSDP), ranking Kerala among the lowest capital-spending states in India, the White paper states.

The state has operated under acute stress, relying on the Reserve Bank of India’s Ways and Means Advances for 262 days and entering overdraft for 84 days over the course of 2025.

Cumulative losses of public sector undertakings (PSUs) have surged to Rs 78,851 crore, with the Kerala State Road Transport Corporation (KSRTC) and the Kerala Water Authority flagged as the worst-performing entities.

The White Paper sharply critiques the Kerala Infrastructure Investment Fund Board (KIIFB), labelling its borrowing model as an unsustainable strain on state revenue. It details an outstanding loan liability of approximately Rs 21,000 crore that must essentially be treated as direct government liability. Furthermore, the document alleges clear political favouritism under the previous LDF government, noting that 20% of KIIFB’s total spending was directed exclusively to Kannur, the political stronghold of the CPM.

Chief Minister VD Satheesan said that the White Paper serves as an exercise in transparency, giving citizens the right to know the precise state of the treasury as a roadmap for future fiscal planning.

Opposition leader and former CM Pinarayi Vijayan, along with former Finance Minister KN Balagopal, vehemently rejected the findings. They came up with a dissent note against the White Paper. In the dissent note , KN Balagopal highlighted that the government tasked a three-member panel with drafting the document. He stated that the document lacks legal validity because it was created by three outsiders without the knowledge of the Finance Department. He noted that official white papers are traditionally prepared by the department itself, adding that the government is prohibited from sharing confidential financial documents with external parties.