Kerala rejects Centre’s onetime offer of ₹5,000 cr. to tide over fund crunch
The bugle has sounded for a legal battle between the Centre and Kerala in the Supreme Court, after the Union government said on Wednesday that it could only spare ₹5,000 crore as a onetime measure to avert an immediate financial crisis in the State.
The amount offered by the Union government will not be enough to fulfil Kerala’s most basic financial commitments, including pensions and salaries, senior advocate Kapil Sibal and C.K. Sasi, representing the State, told a Bench of Justices Surya Kant and K.V. Viswanathan.
The Union government also said it would deduct ₹5,000 crore from the State’s net borrowing ceiling in the first nine months of the financial year 20242025, and stipulated that the State would not be allowed any “ad hoc” borrowing in 20242025 if it takes the ₹5,000 crore being proffered now.
Rejecting the offer, Mr. Sibal said: “We want an absolute minimum of at least ₹10,000 crore. This ₹5,000 crore does not take us anywhere. I will not be able to pay my people.”
The court was hearing an original suit filed by Kerala accusing the Centre of interfering with its financial affairs in violation of the principle of federalism.
Hearing next week
In an earlier hearing, Justice Kant said the suit was probably the first of its kind in the Supreme Court.
The court listed the case to hear arguments for interim relief on March 21.
The Bench had initially urged the Union and State governments to resolve the issue out of court. But Wednesday’s hearing saw any hope for an amicable resolution fade away as Additional Solicitor General N. Venkataraman, appearing for the Union government, read from a note detailing the statistical projections and reasons for limiting financial help to Kerala.
“So, the negotiation part is over. You [Union government] have made your position clear. Your note is selfexplanatory,” Justice Kant said after the reading.
Mr. Sibal said that it seemed as if the Union government’s note was prepared under the assumption that the State was not entitled to the amounts required to pay its people. “The note assumes that our suit should be dismissed,” he said.
The note said Kerala’s projected Gross State Domestic Product (GSDP) for 20242025 is estimated at ₹11,19,906 crore. The net borrowing ceiling for Kerala is three per cent of its GSDP, which would amount to ₹33,597 crore.
Out of ₹33,597 crore, ₹4,711 crore has to be deducted for offbudget borrowing done by Kerala in 20212022. If Kerala, according to its demand, wants an advance of ₹15,000 crore before the end of March 2024, its borrowing space for the next financial year would be reduced to ₹6,664 crore, the note said.