Kerala govt moves SC claiming Centre’s interference in its power to regulate finances

The Kerala government has filed a suit under Article 131 of the Constitution through its chief secretary by saying that the Union government has taken control over its budgeting process through executive actions.

New Delhi:The Kerala government has moved the Supreme Court against the Centre’s alleged interference with its power to borrow and regulate its own finances. 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 October 31, 2023, a sum of Rs 26,226 crores is imminently and urgently required in order 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 in order 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, 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 has 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 ₹1,07,513.09 crores 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.

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