The plea by the state government alleged "needless interventions in the state’s daily financial affairs" by the Union government.
Supreme Court of India. (iStock)
The Supreme Court on Friday, 12 January, issued notice to the Union government over the original suit filed by the Kerala government alleging the former’s interference with the state’s power to borrow and regulate its finances.
The plea by the state government alleged “needless interventions in the state’s daily financial affairs” by the Union government, especially those related to borrowing funds from outside.
In an earlier hearing, on 13 December last year, the Kerala government told the apex court that “frequent and unilateral interferences” by the Union government impede the state’s ability to fulfil its promised commitments to the people of Kerala by incorporating them into the yearly budgets and obtaining resources from as many different sources as possible.
It claimed that such interferences violated federal principles.
The state administration has petitioned the Supreme Court three times in the past six months to obtain orders against the Union government regarding financial matters.
While the petitions in the past focused on the Union government’s refusal to allow central funding and assistance in time, the current complaint focuses on its “deliberate restriction of even the state’s ability to borrow from other parties”.
The complaint filed stated, “It deals with the executive power conferred on the plaintiff state under Article 293 of the Constitution of India to borrow on the security or guarantee of the consolidated fund of the state in alignment with the fiscal autonomy of the plaintiff state as guaranteed and enshrined in the Constitution.”
In the lawsuit, the LDF government has requested that the apex court provide proper guidelines or orders to the Union government to accept its right to gather the necessary resources to draft a pro-people budget within the next two months.
The state administration alleged that letters in March by the Union of India through the Ministry of Finance and the changes made in Section 4 of the Fiscal Responsibility and Budget Management (FRBM) Act had facilitated meddling in the state’s financial affairs.
Speaking with South First earlier, Kerala Finance Minister KN Balagopal stated that the state administration is asking the Supreme Court for assistance in lifting all the unnecessary borrowing restrictions the Union government has put in place.
He claimed that the state was compelled to file the petition because the Union government had reduced the state’s borrowing cap, which may cause a serious financial catastrophe in the coming months.
Balagopal stated, “The BJP government’s imposition of a borrowing ceiling at the state level violates fiscal federalism principles.”
According to him, the suit was brought under Article 131 of the Constitution, which grants the apex court the initial authority to resolve conflicts between the Union government and state governments.
According to the petition, the Kerala Fiscal Responsibility Act, 2003, governs the borrowing caps and the amount of such borrowings in the state. The state government is given precise goals under this Act to help it reduce its budget imbalances.
The state has notified the apex court that the fundamental goal of this state legislation is to achieve fiscal consolidation, which includes lowering fiscal deficits and managing public debt to preserve macroeconomic stability and sustainable economic growth.
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