Kerala pension society borrowed Rs 32,000 crore in four years – The New Indian Express

Express press service

THIRUVANANTHAPURAM: The cumulative debt burden of Kerala Social Security Pension Limited (KSSPL) from its inception in June 2018 to May 2022 is estimated at Rs 32,000 crore. After taking into account interest payable to creditors, the liability will increase to at least Rs 35,000 crore, sources at the Accountant General’s office have said.

As the state government withdrew its financial support for KSSPL, a special purpose vehicle created in June 2018 to ensure rapid distribution of social pension to more than 52,000 state beneficiaries, uncertainty has gripped of the future of the company.

The government’s decision, following an instruction from the Union Finance Ministry to book KSSPL’s debt as the government’s, will create a special situation forcing creditors not to sanction further lending to the company as it does not there is no money back guarantee. This can lead to a situation disrupting the distribution of the social pension.

“It’s just a technical order. There is no question of the government withdrawing its support for the KSSPL. What has happened now is the abandonment of the legal mandate in this regard, which will give more flexibility to the company,” said a senior government official who preferred anonymity.

“Also, the total debt does not mean that the company has so much responsibility. Periodic repayments have been made from budget support and central allocation under the National Social Allowance Scheme,” the official said.

Economist V Nagarajan Naidu, who has done extensive research on Kerala’s public debt, said the revised GO relieving the state of responsibility to repay the KSSPL loan would not withstand legal scrutiny as the company was an arm of the government.

Pension company debt is shocking, says ex-AG

“There are only government officials and ministers as directors of the company. The government can never orphan this business,” he said. KSSPL is headed by Minister of Finance KN Balagopal and its head office is Room No. 400 of Department of Finance, Government Secretariat.

According to CAG state finance reports tabled in the assembly, the total borrowing of KSSPL was Rs 6,843 crore in 2019-20 and Rs 8,604 crore in 2020-21. According to sources in the AG office, the borrowings of KSSPL in the year of its establishment was Rs 6,700 crore. “The audit report for 2021-22 has not yet been tabled at the assembly. But, borrowing for the year exceeded the previous year’s figure,” a source said.

The company has spent Rs 10,036 crore to distribute the pension to 52.27 lakh beneficiaries at Rs 1,600 per month in 2021-22. At least 90% of this sum was mobilized by loans. During the first quarter of this financial year, the company might have taken a loan of around Rs 2,500 crore,” the source said.

Former Accountant General James K Joseph said KSSPL’s debt figures are shocking. “We all thought that the KIIFB would turn out to be the worst burden on the state. It’s not. Unlike KIIFB, KSSPL does not have the support of legislation to ensure an annual income. A paltry allocation in the budget for the social security pension will not match the huge expenditure. These are serious issues,” James Joseph told TNIE.

KSSPL’s main creditors are a consortium of primary agricultural cooperative societies, KSFE, Bevco and Motor Workers’ Welfare Fund Board. “While 50% of the loan came from the consortium, KSFE financed 30%. The rest is split primarily between Bevco and a few welfare fund boards,” said James Joseph. According to Nagarajan Naidu, the guarantee provided by the government is essential for the company to raise additional funds from institutions such as KSFE.

“This will create trouble for creditors as the anomaly of sanctioning unsecured loans will be challenged by their internal auditors. The government must come up with an alternative plan like creating a pension fund to pay social pensions,” Nagarajan said. To date, there are no social security and social pension payment arrears and the government has authorized payment until May.

An exclusive SPV for loans

KSSPL was incorporated on June 26, 2018
Paid-up capital of Rs 100 crore sanctioned by state plan fund in 2018-19 budget
Purpose: To act as a special purpose vehicle (SPV) for the payment of social security pension; find funds on a temporary basis from other sources; act as the coordinating body of various welfare fund councils to improve the flow and use of funds.

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