New Delhi: The Supreme Court Friday sought response from the Centre on a plea filed by the Kerala government alleging interference with its power to borrow and regulate its own finances.
A bench comprising Justices Surya Kant and K V Vishwanathan issued notice to the Centre on an original suit filed under Article 131 of the Constitution by the LDF government. Senior advocate Kapil Sibal, representing the Kerala government, submitted that the borrowing limits were affecting the state's ability to release salary payments and pension.
The apex court has scheduled the matter for hearing on January 25, 2024. The Kerala 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 imposition of the borrowing ceiling put by the Centre has led to an accumulation of unpaid dues over the years and it could trigger a grave financial crisis. The Kerala 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 on 31.10.2023, 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 Kerala government has challenged the directions issued by the Ministry of Finance in the letters written in March and August this year. The Kerala 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 have the potential to damage the federal structure by transgressing upon the exclusive financial domains of the state.
The Kerala government said it has suffered a cumulative expenditure loss or resource deficiency of ₹1,07,513.09 crores over fiscal year 2016-2023 due to such actions of the Centre and as a consequence, the state was not able to fulfil the commitment made in its annual budgets.
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