A 50% hike in the land tax, expected to bring in an additional ₹100 crore for the State government, plans to transform the Kerala Infrastructure Investment Fund Board (KIIFB) into a “revenue-generating entity,” as well as announcements aimed at boosting investment-friendly infrastructure, marked the 2025-2026 Kerala Budget presented by Finance Minister K.N. Balagopal here on Friday.
Presenting his fifth Budget in the Kerala Assembly, Mr. Balagopal chose to paint an optimistic picture of a State economy that has “definitely overcome the trying times of severe fiscal constraints” that had affected it in recent years.
Wayanad rehab
In some areas, the Budget sped along expected lines as it announced a project with a Phase-1 funding of ₹750 crore for the rehabilitation of landslide survivors in Wayanad and a ₹50-crore special package for mitigating human-wildlife conflict. Though expected, the 2025-26 Budget, the last full one of the current Left Democratic Front (LDF) government, did not announce any hike in the social security pensions.
While Mr. Balagopal described his Budget as forward looking, the Opposition Congress-led United Democratic Front (UDF) slammed it as a “hollow” document that has dismally fell short of addressing the requirements and and priorities of the State from a realistic perspective.
In the case of the land tax, basic tax rates across all slabs will be increased by 50%. The rate in the lowest slab will be increased from ₹5 per are (2.47 cents) a year to ₹7.5 per are. The highest slab will see a rise from ₹30 per are annually to ₹45.
Additional resource
Compared to last year, Mr. Balagopal’s latest Budget has, in general, eyed additional resource mobilisation on a modest scale, setting a relatively low target of ₹366 crore.
Apart from the land tax hike, it also announced a slew of court fee revisions for raking in an additional ₹150 crore and a hike in the lifetime road tax of electric vehicles which is expected to bring in ₹30 crore.
Though short on big-ticket announcements, the Budget announced that ₹1,000 crore would be made available through KIIFB for the direct land purchases for the development of the Vizhinjam-Kollam-Punalur Growth Triangle (VKPGT). VKPGT is centred on the potential of the Vizhinjam port developing into a major export-import port in future.
Economic development opportunities along the ‘influence zone’ of the West Coast Canal and plans to kick off the preliminary activities for the Thiruvananthapuram Metro in 2025-26 were also part of Friday’s announcements.
The Budget emphasised the government’s commitment to “ensure and internalise the tenets of spatial planning” on the basis of ‘what can be constructed where,’ given the State’s vulnerability to disasters.
On KIIFB, Mr. Balagopal’s announced that the government intended to explore ways to transform it into a revenue-generating entity, but he said that no decision had been finalised yet, especially with regard to the collection of toll/user fee on KIIFB roads.
Planning committees
For addressing urbanisation-related issues in the long run, Mr. Balagopal has announced Metropolitan Planning Committees for Kochi, Thiruvananthapuram and Kozhikode.
He also announced that a detailed proposal would be prepared for allowing “local governments and their consortium” to raise ₹1,000 crore through Municipal Bonds, Green Bonds and Pooled Municipal Bonds.
Employee benefits
With regard to pending employee benefits, Mr. Balagopal said the final instalment of the service pension revision arrears, around ₹600 crore, will be disbursed in February.
Two instalments of the pay revision arrears will be sanctioned during the current financial year, but it will be merged with the provident fund (PF). However, the lock-in period of two instalments of the dearness allowance (DA) arrears stands waived during the current fiscal.
The Budget also announced a memorial to M.T. Vasudevan Nair, the doyen of Malayalam literature who passed away in December. The memorial, which will focus on his life, literature and contributions, will come up near Thunchanparamba, Tirur.
The Budget envisages revenue receipts to the tune of ₹ 1,52,351.67 crore and revenue expenditure of ₹ 1,79,476.20 crore in 2025-26. While the total revenue receipts are expected to rise by ₹ 19,421.87 crore over the revised estimates for 2024-25, the State’s own-tax revenue (SOTR) is expected to go up by ₹ 9888 crore and the non-tax revenue, by ₹ 1,240 crore.
