Auditor Flags Rs 4.85 Lakh Crore Debt Facing New Kerala Government

The Comptroller and Auditor General flagged Kerala's financial situation in a report tabled in the Assembly Tuesday afternoon. The CAG report said the state had missed fiscal targets it had set for itself and continued to rely heavily on borrowing, particularly for day-to-day expenses.

Overall the Kerala government, the CAG said, owed Rs 4.85 lakh crore as of March 2025, including loans raised through state-backed agencies like the Kerala Investment Infrastructure Fund Board (KIIFB) and Kerala Social Security Pension Limited (KSSPL).

The CAG also warned that revenue had not kept pace with growth.

Kerala economy expanded nearly 10 per cent during 2024-25 but government revenue grew just 0.3 per cent. This, in turn, meant an increase in revenue and fiscal deficit that forced the state to borrow even more money to cover running costs and spending on development projects.

And to round of what seemed to be a damning report, the CAG said the previous government - a Left coalition led by the CPM's Pinarayi Vijayan - had been 'inefficient' in tax collection.

One of the more shocking findings is that funds from the chief minister's disaster relief fund were 'withdrawn irregularly'. A sum of Rs 262 crore - unspent contributions - was transferred to the state government's main account. This, the CAG said, made deficit seem lower than actual.

Another was the growing burden of fixed expenses; salaries, pensions, loan interest payments, and subsidies consumed nearly 80 per cent of revenue, leaving limited room for new spending.

The audit found Kerala had also carried forward unpaid liabilities worth more than Rs 3,500 crore, including dues related to pension and road safety funds.

Vijayan's Left Democratic Front was defeated by the Congress-led United Democratic Front in the April-May election. Neither the LDF nor CPM nor Vijayan have commented so far.

Meanwhile, in a separate report, the CAG also pointed to lapses by the state's transport department. Specifically, it found that over 91,000 vehicles were operating with expired fitness or registration certificates, causing an estimated loss of nearly Rs 48 crore in penalties and fees.

Also, 344 such vehicles were involved in accidents that resulted in 32 deaths.

The report also noted that Rs 37.48 crore had been spent on automated tracks for student drivers and on vehicle testing stations. But only two tracks are operational. No station is.

These and other related findings will likely snowball into a political flashpoint in the state, particularly as the new Congress government grapples with the poor financial condition and arguing that reduced assistance from the Bharatiya Janata Party-led centre, as well as restrictions on borrowing, had contributed to this situation.