State borrowing limits: Ready for dialogue with Kerala, Centre informs SC
NEW DELHI : The Union government informed the Supreme Court on Tuesday that it is prepared to engage with the Kerala government on the limits the Centre imposed on the state’s borrowing powers. Senior advocate Kapil Sibal, appearing for the Kerala government, told the court that a state delegation would fly to New Delhi on Wednesday for a dialogue with the Centre.
This development came after a two-judge bench comprising Justice Surya Kant and Justice K. V.
Viswanathan suggested that the finance secretary of Kerala meet with the Union finance minister to resolve the matter. The discussion arose during a hearing of a suit filed by the Kerala government challenging the Centre’s decision to impose a ceiling on its borrowing amount.
Kerala argued that this restriction resulted in a severe crisis in its budget operations and violated the principles of fiscal federalism. The Kerala government’s suit contends that the Union finance ministry, through two letters issued by its public finance-state division on 27 March and 11 August, as well as amendments made to Section 4 of the Fiscal Responsibility and Budget Management Act, 2003, imposed a net borrowing ceiling on Kerala, restricting its borrowings from all sources, including from the open market.
Also read: Mint Explainer: How the transfer of funds from the Centre to states is decided In response to the suit, the Union government, through the Attorney General for India, filed a written note in the Supreme Court stating that any financial stress faced by the Kerala government was primarily due to poor financial mismanagement. According to the Union government, “substantial financial resources" were provided to the Kerala government from financial years 2020-21 to 2023-24, over
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