Why not settle financial dispute by negotiating with each other? Supreme Court tells Kerala and Centre on petition

NEW DELHI: The Supreme Court on Tuesday asked the Kerala and Central governments to discuss the financial issue and find a solution. The Supreme Court asked this while considering the Kerala government's petition against the central government's action of slashing its borrowing limit.

Kerala and the Centre replied that they are ready for discussion. The Supreme Court directed the Kerala Finance Minister and the Union Finance Secretary to hold a discussion. The Supreme Court asked the two to inform their position on the matter at 2 o'clock today. Kerala has made it clear that the Finance Minister will arrive in Delhi today or tomorrow in case of a discussion.

The central government had told the Supreme Court that allowing Kerala to borrow more money would lead to a financial emergency in the state. Allowing Kerala to borrow more will harm the fiscal framework. It would be tantamount to encouraging poor financial management of states. Allowing states to borrow more is not good on a long-term basis. It will increase the cost of borrowing and lead to financial crisis. The Centre also pointed out that Kerala would have been in a bigger crisis if it had not controlled the level of borrowing of the state by using the constitutional provisions. The Union Finance Ministry issued the reply affidavit to Kerala's application seeking the issuance of an interim order allowing it to borrow more money.

The affidavit also rejected Kerala's contention that the Centre considers any loan taken by any government institution as state debt. The Centre stated that it is not against institutions like KSRTC and KSEB taking loans on their own.