SC Recommends Special Financial Relief for Kerala Amidst Centre-State Dispute


The Supreme Court suggested on Tuesday that the Centre adopt a more lenient approach and provide Kerala with a one-time package under stricter conditions compared to other states. Justices Surya Kant and KV Viswanathan’s bench made these recommendations while addressing Kerala’s plea against the Centre concerning financial matters.

The court advised the Centre to consider a one-time package for Kerala as a special case, with more stringent conditions than those applied to other states. The suggestion included implementing these conditions by March 31. The court emphasized that while being liberal with existing states in the future, Kerala’s situation warranted special attention.

Senior advocate Kapil Sibal brought Kerala’s case before the Apex Court, highlighting the Centre’s failure to release approximately 19,000 crores. The court encouraged both parties to collaborate and find a resolution.

The court scheduled further hearings for the following day. Previously, the Supreme Court had instructed the Kerala Government to engage in discussions with Centre and state officials to address their financial disagreements.

In its affidavit, the Kerala Government asserted that the Central Government is responsible for about 60 percent of India’s total debt. The state argued against the Union Government’s attempts to regulate Kerala’s borrowing, considering its minimal contribution to the country’s overall debt.

The Attorney General, in a note submitted to the Supreme Court, characterized Kerala as one of the financially weakest states. Responding to Kerala’s allegations, the Centre stated that Kerala’s fiscal health was compromised and highlighted various concerns raised by finance commissions and the CAG.

The Attorney General’s written note emphasized the impact of state debt on the country’s credit rating. It addressed Kerala’s grievances regarding alleged interference in its financial affairs by the Centre, which hindered the state’s ability to meet its budgetary commitments.

Kerala’s petition emphasized its constitutional right to borrow under Article 293, asserting that recent actions by the Centre, such as imposing borrowing ceilings, infringed upon the state’s fiscal autonomy.

The Kerala government cited letters from the Ministry of Finance and amendments to the Fiscal Responsibility and Budget Management Act as instances of undue interference by the Centre in the state’s financial matters. It claimed that such interference, particularly in setting borrowing limits, undermined the state’s ability to borrow from various sources, including the open market.

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About the Author: Nunnem Gangte