Kerala’s fiscal health white paper calls for reform of loss-making public enterprises

Thiruvananthapuram: The Kerala government tabled a comprehensive white paper on the state’s fiscal health in the Legislative Assembly on Thursday, shedding light on the mounting losses of public sector enterprises (PSEs) and advocating a series of structural reforms to restore financial stability.

Titled “Kerala’s Fiscal Health: A Status Report,” the document was prepared by a committee led by former Union Cabinet Secretary K.M. Chandrasekhar. It presents a sobering picture: the accumulated losses of all state PSEs surged from ₹31,517.1 crore in 2021 to ₹72,851.2 crore in 2024-25, more than doubling in four years. The report warns that these enterprises have become a persistent drain on the exchequer, with their poor performance spilling over into the broader economy.

The white paper identifies the Kerala State Electricity Board (KSEB), the Kerala State Road Transport Corporation (KSRTC), and the Kerala Water Authority (KWA) as the three biggest loss-makers, together accounting for an overwhelming share of the aggregate losses. “The persistent losses of these PSEs have led to the erosion of their net worth and continuous cash loss, forcing many of them to depend on budgetary resources to continue their operation,” it states. The committee recommends reforming these utilities urgently so they no longer burden public finances, while ensuring essential services remain accessible and affordable for the poor.

Among its key recommendations, the white paper proposes merging the Kerala State Beverages Corporation (Bevco), which handles liquor distribution, and the Kerala State Civil Supplies Corporation (Supplyco), which manages essential commodities, into a single corporation with separate divisions. The move is intended to cut costs and improve operational efficiency.

In a more far-reaching suggestion, the committee says that non-strategic PSEs may be considered for “disinvestment, privatisation, or closure” where they are potentially non-viable. However, it stresses that in such cases, the livelihoods of employees must be protected and the productive potential of the land and other assets held by these entities should be harnessed.

The white paper also proposes a fundamental shift in the subsidy mechanism. It recommends moving from production-based subsidies—which often end up supporting inefficient operations—to consumption-based subsidies that directly benefit the needy. This, the report argues, would reduce fiscal strain while better addressing social welfare goals. “Social responsibilities should not be used to mask operational inefficiencies or financial mismanagement,” the document notes.

The report, tabled by the United Democratic Front (UDF) government, does not prescribe a timeline for implementing the recommendations. The government has not yet announced its action plan, leaving room for political debate. Opposition parties are expected to raise concerns over job losses and the future of public services.

The white paper’s emphasis on structural reforms comes against the backdrop of Kerala’s strained public finances, marked by high debt and recurring revenue deficits. While the report stops short of advocating aggressive divestment, its suggestions signal a potential shift in the state’s approach to managing its loss-making enterprises—a move likely to face both support and resistance as the state navigates its fiscal challenges.