Murali Gopy and "Socialist Republic of Kerala"

Updated: May 5

Dear Murali Gopy,


I am an admirer of your story making and storytelling skills and had followed your movies with lot of approbation. Recently I came across a query posted by you in your facebook page, which is reproduced herein below

How many of you would agree if one says its high time India decentralized politically, and a TRULY federal setup brought in, with the Centre put ONLY in charge of making foreign policy, defense and inter-state dispute decisions, in consultation with States?

I had interpreted your question in following manner for the ease of answering it.

  1. States should be given absolute freedom to determine its financial and political road maps without any interference from the Central Government.

  2. Central Government should not interfere in the affairs of the States and look after ONLY making of foreign policies, defense and inter-state dispute decisions, in consultation with States, in consultation with the States.

  3. State Government should be permitted to collect the entire revenue and taxes from the State and should be permitted to spend the same within the State in accordance with the budgetary allocation.

  4. State Governments shall provide a reasonable amount of its revenue to the Central Government for making of foreign policies, defense and inter-state dispute decisions, in consultation with States.

After reading the said question and interpreting the same, out of sheer curiosity, had tried to place our State of Kerala, which is ranked as 22nd in the Country with an area of 38,863 Sq.km, having 12th largest population( 3.63 Cr) in the Country with 3rd highest dense population in the Country, with lowest population growth rate , as a TRULY Federal State.


Hope you are aware of the fact that the God’s Own Country is a revenue deficit State and the said revenue deficit as per the latest available Audit Report is INR17,462 Cr. It is also worth to note that the fiscal deficit of the State is INR26,958 Cr and we have failed to achieve any of the targets fixed in its Medium Term Fiscal Plan or Kerala Fiscal Responsibility Act during 2018-19. As there is a fiscal deficit and revenue deficit, it will be interesting to note our sustainability capacity as a Federal State, as far as revenue side is concerned. The main source of revenue of the State is own tax revenue and the same is on a decreasing trend when comparing to the previous years. But, thanks to all our treasure hunters(lottery buyers) to contribute generously to the Non tax revenue of the State, which had noted a significant increase during last financial year. Needless to say, the major contributor for our tax revenue is beverages department, thanks to all the Malayalees for contributing to that beyond caste, creed, sect and sex. So to be a strong State, Kerala have to sell more and more lotteries and bottles!


It is also interesting to have a peep on to the expense side of the State to know the strength of the State to stand on own foot, without the support of the Union Government. Revenue Expenditure of the State had increased from INR71,746 crore in 2014-15 to INR1,10,316 crore in 2018-19 recording a growth rate of 54 per cent during the period. Revenue expenditure as a percentage of total expenditure ranged between 89 to 93 per cent during the period showing predominance of revenue expenditure. Share of committed expenditure in revenue expenditure was 63 per cent during 2018-19 and it consumed 75 per cent of revenue receipts during the year. Interest payments consumed 18 per cent of revenue receipts and is a matter of concern for the State Government.Keeping in mind the said poor revenue growth and escalated expenditure , don’t you think it is wise to continue as a “dependent State” till Central Government meet the deficit on behalf of the State? To be franck, if your true intention is to burdenise the Central Government for our mistakes, keep the jovial smile on your face and remain silent for some more time.


As a filmmaker you may have travelled through many of the countries so far, needless to ask about your exposure to the our Poor Indian States. You may have surely travelled through the excellent roads which are beautifully laned and marked in international standards in "other States of India" too. You may have wondered, why Our State of Kerala are still having congested roads and bottlenecks at every junctions. Likewise, you may have noticed that, we Keralites, are searching for pennies while sitting on top of a huge treasure- Tourism Sector, which is undermined by all Governments through criminal mismanagement. Have you ever wondered, why our tourist places are nasty and dirty and having very poor infrastructure? Have you ever noticed, why our Governments failed to create a quality infrastructure and maintain that in International Standards? To get an answer to that, we have to look into the allocation of the State towards the Capital Expenditure.


Our Capital expenditure is only INR 7431 Crore in the Financial Year 18-19 and the same is showing a declining trend during the period. It decreased by INR1,377 crore during 2017-18 and further decreased by INR 1,318 crore in 2018-19 showing low priority of Government towards capital expenditure during last two years. State’s share of expenditure on health and education sector in total expenditure was more than General Category States, but the share of capital expenditure and development expenditure in total expenditure was less than that of General Category States. The said point specifically answers why we are having poor infrastructure. Keeping in mind the said poor capital expenditure spending, don’t you think it is wise to continue as a “dependent State” till Central Government creates all the required infrastructure for the State?

Similarly, Consolidated Sinking Fund was constituted with the aim to amortize the outstanding liabilities of Government, but Government did not contribute to the fund during 2018-19. Similarly, Government has to constitute a Guarantee Redemption Fund for crediting guarantee commission collected for meeting future liability arising out of guarantees given by the Government. This fund has not been constituted so far. The accumulated balance in State Disaster Response Fund (SDRF) at the end of March 2019 was `2,113.98 crore.


As a movie maker and dreamer, I admire your passion and ideas to make our State a federal one. But you have to think from financial perspective also to realise that dream. However good your idea is, you need a producer with deep pockets to project that in silver screen(now it is OTT) as you desire. Friend, our borrowings are very huge and what we are seeing is only the tip of the gigantic iceberg. KIIFB borrowed / raised funds amounting to INR 3,106.57 crore from financial institutions till 2018-19 by issue of bonds etc., which were to be repaid from the petroleum cess and part of motor vehicle tax set apart by the Government of Kerala from its own revenue resources for transfer to KIIFB. This included an amount of INR 2,150 crore raised through Masala Bonds in foreign countries. Since KIIFB has no source of income, the borrowings by KIIFB for which State Government stood as a guarantor, may ultimately turn out to be a direct liability of the State Government. Any servicing of these debts by the State Government would entail surpassing the FFC and KFR fiscal deficit target of 3 per cent (in the current year it already stands at 3.45 per cent) and the debt GSDP ratio of 30 per cent (in the current year it stands at 30.91 per cent). Further, such off-budget borrowings are not in accordance with Article 293 (1) of the Constitution of India. Open market borrowings have a major share (54 per cent) in total fiscal liabilities of the State. The net debt available with State for development activities was only INR 3,168 crore (13 per cent of public debt receipts) during 2018-19. Maturity profile of the State shows that about 51.22 per cent (`81,056.92 crore) of the debt is to be repaid by March 2026. Keeping in mind the said huge borrowing, don’t you think it is wise to continue as a “dependent State” till Central Government somehow repays it for us? But, if your strong desire it to punish the Central Government, keep the tactical silence and peacefully enjoy them taking the burden of our inabilities!!. Hope you are now started getting my point?


It is also great to look into our savings and its disparity with the budgetary allocations, before thinking about making it an “Independent State of Kerala”. The overall savings of the State is just INR 6,653.31 crore in 2018-19 against the total budget allocation of whopping INR 1,60,374.90 crore!. As per the observation of CAG( We will not trust that office anyway, still) there are unnecessary and injudicious re-appropriations indicated that departmental officers failed in assessing actual requirement of funds in heads of account under their control.


I am not getting into the numerous benefits the “Citizens of State of Kerala” is enjoying in the from of MNREGA, GST share allocation etc as that may hurt our sentiments, if detailed further. Keeping in mind the said poor financial situation of the State, don’t you think it is wise to continue as a “dependent State” till Central Government give some more such soaps and benefits for the welfare of the citizens of our State?. Sir, why we want to take that burden now? We will get the benefits, repack it and distribute among our people. Why you want to lose that goodwill(or badwill) at all?


So, though many of us have the wild dream of making the State of Kerala an Independent(Socialist) State, it may not be practical from an independent financial standpoint. Though you have shown the magnanimity to polish your words and tweaked it as a “Politically Decentralised” State, the ultimate objective is to make the State an Independent one from the so called alien Central Government.Hats off.


Thou we shall name it as “ Socialist Republic of Kerala”, it shall remain as a dream till we fully repay all our debts, till we grab our fair share of infrastructure, till we unfairly distribute the benefits given by Central Government to our own people and till we learn to spend judiciously ! Be patient till then and don't lose the hope of a local flavoured Socialist Republic


Bijoy P Pulipra

(Bijoy P Pulipra, NCLT Practitioner and Accredited Commercial Arbitrator, is a qualified Insolvency Professional , Company Secretary and Registered Valuer - Financial Assets. He is qualified as a Lawyer and also possess qualification to act as an Independent Director )

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