Union government rejects Kerala’s request to borrow additional funds of ₹19,370 crore

Also Read: SC allows Kerala to borrow ₹13,608 cr, tells Centre no suit withdrawal pre-condition

Finance secretary rejected the demand

He said the reasons for the additional amount sought by the state were presented before the apex court during the hearing.

“Our request was examined by the Union finance secretary. However, he was not ready to agree to it,” Venu said.

A state finance ministry source said that the state was indeed eligible for borrowing an additional amount of ₹19,370 crore.

“Our request to the Union government was to rectify an error in the calculation of the borrowing space allocated to the state of Kerala. The state has accepted the calculation based on principles endorsed by the central government.

“However, it was discovered that the borrowing space allotted to the state government was erroneously reduced by the central government.

The request from the state government today was to rectify this mistake,” the source told PTI.

Earlier, the Union government had informed the court that it was going to release over ₹13,000 crore to the state straightaway. The state government has said that it was eligible for ₹13,000 crore this year.

Also Read: Union government’s offer amounts to injustice, says Kerala finance minister

The meeting

The meeting was held after the Supreme Court on Wednesday advised the Union government and the Kerala government to iron out their differences on a cap on net borrowing by the state.

The apex court made the observation while it was hearing a suit filed by the Kerala government accusing the Union of India of interfering in the exercise of its “exclusive, autonomous and plenary powers” to regulate the state’s finances by imposing a ceiling on borrowing.

The dialogue between the Union government and the state must not stop merely because of the pending suit, the court had said while stressing the need to resolve the issue.

The Kerala government had told the top court on 19 February that a meeting held on 15 February failed to make much headway in resolving the contentious issue.

In an original suit filed under Article 131, the Kerala government said that the Constitution bestows fiscal autonomy upon states to regulate their finances under various articles, and the borrowing limits are regulated by state legislation.

In a note submitted before the top court, the Union government had said that uncontrolled borrowing by states would affect the credit rating of the whole country and that the “fiscal edifice” of Kerala has been “diagnosed with several cracks”.

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