Today (22nd March): The Supreme Court of India has postponed its decision on a plea by the Kerala government concerning a financial disagreement with the Centre. The dispute revolves around allegations of the Union government interfering with Kerala’s borrowing powers.
New Delhi (India), March 22: Today, the Supreme Court reserved its judgment on a Kerala government petition seeking interim relief against the Centre’s alleged interference with its borrowing authority.
READ ALSO: Kerala Faces Financial Crisis: Centre Points to Poor State Administration
A bench comprising Justice Surya Kant and Justice K V Viswanathan reserved the verdict on the matter of interim relief, following a suit filed by Kerala against the Centre.
The Kerala Government’s plea for temporary financial relief is rooted in a suit against the Centre, where Senior Advocate Kapil Sibal raised concerns over the Union government’s conduct within a federal structure.
The Attorney General for the Center, R. Venkataramani, countered Kerala’s arguments, pointing out that the state’s regulations emphasize its fiscal autonomy and deny any breach of Finance Commission recommendations.
READ ALSO: Supreme Court Asked Centre To Give One-Time Financial Package To Kerala
Responding to the notes filed by the Attorney General, Kerala Government submitted and said,
“The Central Government accounts for approximately 60 per cent of the total debt or outstanding liabilities of India. All the states put together account for the rest (approximately) 40 per cent of the total debt of the country. In fact, the Plaintiff State accounts for a miniscule 1.70-1.75 per cent of the total debt of the Centre and the States put together for the period 2019-2023.”
Kerala’s financial health and debt situation have attracted adverse observations from successive Finance Commissions (12th, 14th, and 15th) as well as the CAG, and it is one of the most financially unhealthy states as its fiscal has been diagnosed with several cracks, the Attorney General said in a note submitted before the Supreme Court.
Responding to Kerala’s Government suit, the Centre, in its affidavit, apprised the Supreme Court that Kerala has been one of the most financially unhealthy states, and its fiscal edifice has been diagnosed with several cracks.
Earlier, the Centre proposed offering Rs 5,000 crore to Kerala as a one-time measure for the current financial year, subject to certain conditions. However, Senior Advocate Kapil Sibal contested the proposal, arguing that it presumed the state was ineligible for additional borrowing and that the amount offered was insufficient.
During proceedings, the Supreme Court encouraged both parties to negotiate and resolve the issues through dialogue.
In its affidavit, the Kerala Government highlighted that approximately 60% of India’s total debt or outstanding liabilities are attributed to the Central Government, emphasizing its limited role in the country’s debt profile.
Responding to Kerala’s assertions, the Centre noted Kerala’s fiscal challenges as highlighted by various Finance Commissions and the Comptroller and Auditor General (CAG), labeling it one of the financially weaker states.
READ ALSO: Kerala Declines Union Government’s Rs 5,000 Crore Loan Offer Amid Financial Crisis
Furthermore, the Attorney General emphasized in a written submission that states’ debts impact the nation’s credit rating and alleged that Kerala’s inability to fulfill its budget commitments stems from the Center’s interference in state finances.
In its suit, the Kerala government argued that the Centre’s actions, particularly amendments to the Fiscal Responsibility and Budget Management Act, 2003, and the imposition of borrowing ceilings, the state’s financial autonomy guaranteed by the Constitution.
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