Kerala unveils budget focused on industry, IT, science parks; few measures to cut spending, garner more revenue

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The Kerala budget presented by Finance Minister K N Balagopal on Friday, March 11, laid emphasis on the development of industry and food and science parks and said the state needs more private investment and public-private partnership (PPP) projects to raise funds.

The budget also proposed changes in the plantation and agriculture sectors for encouraging cultivation of new crops.

Yet, the budget spelled out few measures to increase revenue or curtail expenditure. The chief source of funds, as in the budgets of the last few years, will be Kerala Infrastructure Investment Fund Board (KIFFB), which funds public works in the state outside of state revenue.

Balagopal said 962 projects estimated at Rs 70,762.05 crore have so far been sanctioned through KIIFB funding.

The first full-scale budget of the Left Democratic Front (LDF) government in its second tenure seemingly took the cue from the state conference of the Communist Party of India (Marxist) that concluded last week with an endorsement of foreign direct investment and private investment for Kerala’s development.

The finance minister said the budget was prepared with the objective of  “nava Kerala nirmanam” (new Kerala development) with the aim of achieving faster growth while ensuring environment conservation, and sustainability in development and social justice.

The budget estimate for 2022-23 envisaged revenue receipts of Rs 134,097.80 crore against revenue expenditure of 157,065.89 crore. The revenue deficit of Rs 22,968.09 crore is slightly lower than Rs 23,176 crore in the revised estimate for the previous year. The additional expenditure for 2022-23 came to Rs 1,081 crore while the additional resource mobilisation projected was Rs 602 crore. 

Revenue generators 

Among its main revenue generating proposals are an increase in land tax rates, the fair value of land and tax on motor cycles. The state hopes to mop up Rs 200 crore through revision of the basic land tax by the introduction of a new slab above 40.47 ares in grama panchayats, municipalities and corporations. The rates would be increased in a calibrated manner in all the slabs.

Increase of a one-time tax on motorcycles costing up to Rs. 2 lakh by 1% would bring in revenue of about Rs. 60 crore per year; Rs 10 crore would be realised through a 50% hike in the green tax imposed on vehicles older than 15 years.

A one-time increase of 10 % will be implemented in fair value of land across all segments that is expected to result in additional revenue of about Rs. 200 crores.

Balagopal criticised the Centre for a reduction of the state’s main source of revenue, which is its share of central taxes and transfer of resources through other centrally sponsored schemes. On the one hand, tax relief is being given favouring dominant corporate entities but on the other hand the Centre is making large-scale resource mobilization by way of cess and surcharge which need not be distributed among states, he said.

There has been a significant reduction in the share of Kerala from the divisible pool. It was 3.875% during the 10th Finance Commission and then gradually declined to 2.5% during the 14th Finance Commission. That has now been declined to just 1.925%. Kerala will have a shortfall of around Rs.1,1000 crore in Goods and Services Tax (GST) compensation after June 2022.

The minister said Kerala will take initiative to protest against this by enlisting the support of other states.

Industry and IT 

“The Government intends to attract private investment in line with the government policy of augmenting considerable industrial growth of the state. The Government is formulating a project for industrial facilitation parks under PSUs (public sector undertakings) for providing necessary technical assistance and areal facility to private entrepreneurs, “ Balagopal said.

A corpus of Rs.200 crore will be set apart under KIIFB for the construction of these industrial facilitation parks. The pilot project of this scheme will be implemented in United Electrical Industries Ltd., Kollam.

Increasing the budget allocation for industries from Rs.1,058.38 crore last year to Rs.1,226.66 crore, he said emphasis will be given to viability gap funding to local self-institutions for developing industrial parks in a public-private partnership mode. An amount of Rs.5 crore was provided for the development of 25 such parks.

The state will make use of the Kerala fibre optic network (K-FON) backbone infrastructure, which connects 5G towers, for the development of the parks.

The finance minister said the government intended to set up four IT corridors parallel to National Highway 66, which is being developed as a four-lane road.

These four corridors that will begin from existing parks IT are Technopark III to Kollam, Ernakulam to Koratty, Ernakulam to Cherthala and Kozhikkode to Kannur. A new IT park will be set up in Kannur. In addition, 20 small parks with an area of 50,000 to 200,000 sq.ft are intended to be built on acquired land.

“The studies show that we can double the current export of IT products and related services by the next 5 years. At least 200,000 new job opportunities can be created in the existing IT parks. As a part of developing basic infrastructure facilities for this purpose, Technopark, Technocity, Infopark and many other IT centres will be expanded,’’ Balagopal said.

Land acquisition 

An amount of ₹1,000 crore will be earmarked from KIIFB’s land acquisition pool for acquiring land to set up IT parks in Kollam, Kannur and parks in other areas; an additional Rs 100 crore will be provided for the project through KIIFB.

The budget allocation for the  IT sector has been increased by Rs 34 crore from previous year to Rs 559 crore. The budget set apart Rs 26.60 crore for the development of Technopark, Rs 35.75 crore for Infopark in Kochi and Rs12.83 crore for Cyberpark in Kozhikode. Another Rs 201.09 crore has been provided to Kerala State Information Technology Infrastructure Ltd. for various activities including creation of a centre of excellence in aerospace and defence-related products and services on 20 acres of land at Techno City, Pallippuram, Thiruvananthapuram.

Other allocations include Rs 90.52 crore to the Kerala Startup Mission and Rs 28 crore for creating an electronic hardware technologies hub

Science parks 

The state will set up four science parks with an investment of ₹1,000 crore in three years. Centres will be set up in the parks for various areas of applied scientific research. Each centre will be set up on a PPP model in collaboration with industrial region, universities in Kerala, research organizations and two researchers who are experts in the field.

Food and agriculture 

An amount of ₹ 100 crore was allocated from KIIFB for starting 10 mini food parks having facilities to produce and market Kerala’s own produce.

A marketing company on the model of Cochin International Airport Limited, with a capital of Rs. 100 crore, will be established for improving the marketing of agricultural value-added products with the cooperation of industrial – commercial entrepreneurs and others including expatriates. The company’s responsibilities will include marketing, quality assurance and branding of products. An amount of Rs.20 crore has been earmarked for this project.

In addition to rubber, coffee and tea which are already included in the extent of definition of plantation, new crops need to be included. Plantation laws are to be updated by introducing amendments to include pomiculture in plantation.

An amount of ₹ 500 crore was set apart for providing subsidy in rubber sector. At this stage, when the rubber sector is facing a severe crisis, steps are to be taken to increase price, production and consumption of rubber. Steps will be taken to construct more rubberized roads.

The state intends to open mobile ration shops in major centres of all legislative assembly constituencies in the state.

The total allocation of the agriculture department is Rs. 881.96 crore, which is Rs. 48 crore more than that of the previous year.

Net zero carbon emissions 

With the cooperation of various national and international funding agencies, other related institutions, central government departments, expert groups and industrial organizations and with planned projects, achieving the aim of net zero carbon emission by 2050 is the target of the state government, to turn Kerala into a role model for the nation.

Infrastructure: 

The budget allocated Rs. 2000 crore through KIIFB for a 529.4 km long semi-high speed railway line called ‘Silver Line’ from Thiruvananthapuram to Kasaragod proposed at an estimated cost of Rs.63,941 crore. The project is to be implemented by the ministry of railways and the state government with public equity participation and using bilateral loans. Balagopal hoped the Centre will approve this project soon because it has the potential to spark a development boom in the state.

A total amount of ₹ 507 crore was set apart for 10 major infrastructure development projects of the state such as the Vizhinjam deep sea International Transshipment Terminal, Kochi Metro Rail System, Kannur Airport, Annuity Scheme for the 35th National Games, Kochi Integrated Water Transport System, Infrastructure Development of Judiciary, Projects taken over by Kerala Rail Development Corporation including ‘Silver Line,’ and Kollam Alappuzha bypasses

Tourism: 

Apart from interest-less loans and revolving funds or small and medium scale initiatives in tourism, the budget earmarked Rs 362.15 crore for planning and implementation of initiatives like tourism hubs.

It earmarked funds for the study of a proposed Sabarimala greenfield airport and airstrip network meant for air travellers of Kerala who intend to fly from one domestic tourist spot to another, by using 20–40-seater planes, helicopters, and for drone- based transportation.