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New Delhi: The Supreme Court on Monday expressed its reluctance to interfere in a suit filed by the Kerala government against the limits imposed by the Centre on its borrowing powers.
The court, which will hear the case next on 6 March, asked Kerala and the Centre to continue negotiations on the “purely financial” issue.
The SC's remarks came after the Kerala government today informed the court that talks with the Centre over the issue had failed due to the condition imposed by the Centre that Kerala must withdraw the legal suit if it seeks to borrow.
Senior advocate Kapil Sibal, representing the Kerala government, said the state's claim was ₹24,000 crore, with ₹11,000 crore being the entitlement, but the Centre insisted on withdrawal of the suit for even considering this amount.
He said while all states in India had been receiving ₹5,000 crore for power sector reforms, Kerala was denied this allocation due to the lawsuit. Sibal said Kerala was over-borrowing due to investments in education and health, but the state was penalized for its growth in human development indices.
Additional solicitor general N. Venkataraman, representing the union government, said the offers made during negotiations were in the spirit of federalism, mentioning an offer of ₹13,608 crore straight away but conditioned on Kerala withdrawing the legal suit.
Venkataraman said Kerala's borrowing limit had exceeded by over 20% and it needed to meet terms and conditions for its power sector reforms. He advocated for negotiation and compliance with conditions rather than litigation.
The suit filed by the Kerala government contended that the finance ministry had imposed a net borrowing ceiling on the state and restricted its borrowings from all sources, including the open market.
In response, the Centre said any financial stress faced by the state was due to mismanagement.
According to the Union government, "substantial financial resources" had been provided to the Kerala government from 2020-21 to 2023-24 over and above the amount recommended by the 15th Finance Commission. One of these was the payment of ₹14,505 crore as a "back-to-back loan to meet GST compensation shortfall".
The Centre said public finance management being a national issue has a bearing on the credit rating of the country.
In December, finance minister Nirmala Sitharaman, in a reply in Parliament, had clarified that there was no proposal to relax the existing terms for borrowing capacity of state governments, including Kerala, for 2023-24.
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