Centre Informs SC, Open to Have Meeting with Kerala Govt to Discuss Financial Issues

Attorney General R Venkataramani on February 13 told the Supreme Court that the Central government was open to talks with the Kerala government on the issue of the limits placed by the Centre on the State's borrowing limits, writes ETV Bharat's Sumit Saxena.

New Delhi:The Central government on Tuesday told the Supreme Court that it is open for a meeting and prefers an open dialogue in connection with the Kerala government's suit against the Centre’s alleged interference with the state's power to borrow and regulate its finances.

Attorney General (AG) R Venkataramani, representing the Centre, contended before a bench led by Justice Surya Kant that “the suggestion, which fell from the court (during the morning) has received the highest regard it deserves. The government is open to a meeting and I thought let it be kept open…I thought there could be an open dialogue. So, I suppose whatever emerges out of it will pave the way….”.

Senior advocate Kapil Sibal, representing the Kerala government, agreed with the Attorney General's contention. “Whether it is the State or the Centre, there are seasoned administrators…they have seen public life or official life in different capacities. They have seen the world...”, said Justice Kant. Sibal said, “We will fly our delegation from Kerala tomorrow morning. We can have a meeting tomorrow itself…the budget is being presented by the Finance Minister…the others will come. Dialogue can start tomorrow itself."

The bench, also comprising Justice KV Viswanathan, said the court will leave it to the Centre and Kerala government to work out the modalities. Sibal said there is a little urgency. However, the bench suggested that the Kerala government and the Centre can discuss the matter. After hearing submissions, the bench scheduled the matter for further consideration on Monday.

Earlier during the day, the apex court had suggested that the state finance secretary and the representative of the Central government should meet to discuss the issue. The bench told the counsel that they should sit and talk and stressed that cordial ties work best for the country. The Attorney General pointed out that it is a fragile area and must be dealt with carefully. The bench asked the counsel to seek instructions in the matter and scheduled it for further hearing after lunch.

The State government in a suit moved under Article 131 of the Constitution through its chief secretary alleged that the Union government has "taken control over its budgeting process" through executive actions. The suit alleged that the imposition of the borrowing ceiling by the Union government has led to an accumulation of unpaid dues over the years and it could trigger a grave financial crisis.

The State government claimed that imposition of a Net Borrowing Ceiling as deemed by the Union government limits borrowings from all sources, including the open market and thus curtails the exclusive constitutional powers of the state. The suit claims that as of 31.10.2023, a sum of Rs 26,226 crore is imminently and urgently required for the plaintiff state to avert the impending grave financial crisis that has been caused by the impugned orders.

The suit said that the ability to determine the borrowing of the State to balance the budget and make up the fiscal deficit is exclusively within the domain of the states. The State government has challenged the directions issued by the Ministry of Finance in the letters written in March and August this year. The State government has also challenged the amendments to Section 4 of the Fiscal Responsibility and Budget Management Act, 2003, through the Finance Act, of 2018.

The suit said that the defendant does not have the constitutional right or authority to issue directives to the State government under Article 293 of the Constitution, which have the potential to damage the federal structure by transgressing upon the exclusive financial domains of the state.

The State government said it has suffered a cumulative expenditure loss or resource deficiency of Rs 1,07,513.09 crore over the fiscal year 2016-2023 due to such actions of the Central government and as a consequence, the state was not able to fulfil the commitment made in its annual budgets.