Kerala-Centre Fund Dispute: Negotiations Fail, Supreme Court To Hear Matter Next Week
The state said that the absolute minimum amount it needs is Rs 10,000 crore in FY25, without any adjustments.
The Supreme Court has decided to adjudicate the matter pertaining to a dispute on borrowing limits between the state of Kerala and the centre, after negotiations between the two failed.
Appearing for the centre, Additional Solicitor General N. Venkatraman told the court that the union is ready to give a consent for an additional borrowing of Rs 5,000 crore for the state, as an exceptional measure.
Venkatraman said that this consent will be subject to certain conditions:
This additional Rs 5,000 crore will be deducted from the net borrowing ceiling of the state for the first nine months of FY25.
No ad-hoc borrowing will be granted for FY25.
Consent for borrowing in FY25 will only be issued on receipt of prescribed information and documents from the state.
Consent for borrowing for the first nine months of FY25 will be issued on a quarterly basis for up to 25% of the eligibility, arrived at after deducting the early special consent of Rs 5,000 crore.
The state will have to submit the plan it has announced in its budget for FY25, for raising resources and improving the financial position of the state. It has to put this plan into action before a consent for borrowing for the last quarter of FY25 can be given.
Appearing for the state of Kerala, Senior Advocate Kapil Sibal said that the union's solution is premised on the assumption that the state is not entitled to borrow. "I'm entitled to borrow as a matter of right," he said.
"Rs 5,000 crore doesn't take us anywhere. The absolute minimum that we want is Rs 10,000 crore, and that too without any adjustment," Sibal argued.
If adjustments are made in the coming financial year, the state will not be able to manage its finances, he said.
The case will now come up for a detailed hearing on March 21.
The case pertains to a plea filed by the state of Kerala against the central government, accusing it of imposing a net borrowing ceiling, which limits the state's borrowings from all sources, including open-market borrowings.
According to the plea, the reduction in borrowing limits will have an extremely deleterious impact and cause long-term economic damage to the state, which will be irremediable in the short, or even medium term.
The state has suffered a cumulative expenditure loss or resource deficiency of nearly Rs 1.07 lakh crore during fiscal 2016–23, according to the plea.
It is estimated that over a period of the next five years, the net negative impact on Kerala's economy could be as high as Rs 2–3 lakh crore, with FY17 as the base year. This represents 20–30% of Kerala's current gross domestic product over a six-year period, the plea states.
