The Supreme Court on Tuesday suggested that the Centre should adopt a more lenient approach and provide a one-time financial package to Kerala, albeit with stricter conditions compared to other states.
This proposal came forth during the court's discussion on Kerala's plea against the Centre regarding financial issues. In a bench comprising Justices Surya Kant and KV Viswanathan, the court proposed that a special package could be extended to Kerala by March 31, subject to tougher conditions than those applied to other states. The justices recommended a more liberal stance towards existing states in future budgets.
Senior advocate Kapil Sibal highlighted Kerala's concerns before the Supreme Court, citing the Centre's withholding of funds amounting to ₹19,000 crore.
The court urged both the Centre and Kerala to explore possibilities for resolution and announced that the matter would be heard further the following day.
Previously, the Supreme Court had directed the Kerala government to convene a meeting with Centre and state officials to address the financial disputes between them.
In its affidavit, the Kerala government argued that the Centre's attempts to regulate the state's borrowings were unwarranted and exaggerated. It emphasized that the Centre accounts for approximately 60% of India's total debt, while all states combined account for the remaining 40%.
The financial condition of Kerala has garnered criticism from various quarters, including successive Finance Commissions and the Comptroller and Auditor General (CAG).
The Attorney General, in a note submitted to the Supreme Court, described Kerala as one of the financially weaker states, citing numerous fiscal challenges. The Centre, in response to Kerala's petition, asserted that the state's debt situation affects the country's credit rating.
It defended its actions as necessary measures to ensure fiscal discipline and financial stability. Kerala's petition alleged that the Centre's interference in the state's finances, particularly through borrowing restrictions, infringed upon its fiscal autonomy guaranteed under the Constitution.
The Kerala government contended that such interference curtailed its ability to borrow for essential expenditures, as mandated by the Fiscal Responsibility and Budget Management Act, 2003.
The ongoing legal battle underscores the complex relationship between the Centre and states regarding fiscal matters, highlighting the need for a balanced approach to ensure financial autonomy while maintaining fiscal discipline.
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