Empty Coffers: Government Freezes Payments Above Rs 5 Lakh, Suspends Benefits Amid Financial Crunch
- Following the Onam celebrations, the financial crisis in Thiruvananthapuram has worsened, prompting the government to impose severe restrictions on the treasury.
- The revised limit of five lakh for invoice amendments specifically applies to local bodies.
- The government has introduced an invoice discounting system, allowing contractors to exchange invoices through banks if the government is unable to make payments.
Thiruvananthapuram: Government Imposes Severe Restrictions on Treasury Amid Financial Crisis
Following the Onam celebrations, the financial crisis in Thiruvananthapuram has worsened, prompting the government to impose severe restrictions on the treasury. The new regulations limit bill exchanges to a maximum of five lakh rupees, down from the previous limit of 25 lakh. This change is expected to impact local bodies and contractors, leading to delays in the distribution of benefits across various departments.
Impact on Local Bodies and Contractors
The revised limit of five lakh for invoice amendments specifically applies to local bodies. As a result, project activities initiated by local bodies may be postponed until the second half of the financial year. If the regulation is implemented at this stage, many projects may need to be put on hold.
Invoice Discounting System Introduced
The government has introduced an invoice discounting system, allowing contractors to exchange invoices through banks if the government is unable to make payments. Under this system, contractors can receive up to 90% of the invoice amount from the bank, with a maximum limit of five lakh rupees. This facility is also available to local body contractors, who will need to pay the interest on the amount received.
Return to Old Treasury Limits
Earlier this year, the limit for bill exchanges was increased from five lakh to 25 lakh in June. However, due to the ongoing financial crisis, the Treasury has reverted to its old status. With a borrowing requirement of Rs 1200 crore until December, the government has imposed severe restrictions to manage its finances.