Kerala Slams Centre's Condition To ‘Withdraw Suit’ For Borrowing Funds, Calls It ‘Highly Disappointing’

Kerala Slams Centre’s Condition To ‘Withdraw Suit’ For Borrowing Funds, Calls It ‘Highly Disappointing’

The Kerala government has expressed strong disapproval of the Centre’s condition to allow the state to borrow funds only if it withdraws its case before the Supreme Court. Kerala’s Finance Minister K N Balagopal termed the move “highly disappointing” and detrimental to fiscal federalism during a media briefing on Monday.

“The Union government’s stand is highly disappointing and will affect the fiscal federalism of the state and the day-to-day activities of the state government,” Balagopal said.

Balagopal stated that the central government has informed the apex court that if Kerala withdraws its petition, permission to borrow around Rs 12,000 crore would be granted immediately. He said that Kerala’s case in the Supreme Court is aimed at securing funds rightfully owed to the state.

The finance minister underscored the potential adverse impact of the Centre’s stance on Kerala’s fiscal autonomy and day-to-day governance activities.

We have filed the petition seeking the fund as per our constitutional rights. They have asked us to withdraw our plea and it amounts to injustice,” the minister added.

A meeting was convened in the national capital on February 15 following the Supreme Court’s suggestion during a hearing of Kerala’s petition. The petition accused the Centre of interfering in the state’s financial matters by imposing a ceiling on net borrowing.

“This is pure financial thicket. How much can a court interfere, that too by an interim order,” the bench said, adding, “Mentally prepare yourself (Kerala) that we may not be able to give an interim order. We are not experts on the subject matter.”

During Monday’s hearing, the Supreme Court indicated that it may not be able to issue an interim order favoring Kerala’s plea alleging the Centre’s interference in the state’s finances. The bench remarked that the issue was complex and interim orders might not be feasible.

Kerala’s counsel, Kapil Sibal, highlighted that Kerala’s claim amounted to over Rs 24,000 crore, with an entitlement of Rs 11,000 crore. However, the Centre insisted that Kerala first withdraw the suit before considering its entitlement, leading to questions of penalisation for asserting financial rights.

“For borrowing, they are telling us to first withdraw the suit and then they will consider. Are we going to be penalised for filing a suit for our financial rights?” Sibal asked.

The Supreme Court directed the matter to be listed for March 6, urging both Kerala and the Union governments to keep negotiation channels open to resolve the dispute amicably.