Borrowing limit issue; Supreme Court to issue interim order on Mar 21

NEW DELHI: After the efforts to reach a consensus between the Centre and Kerala on the state's financial crisis failed, the Supreme Court has decided to issue an interim order after hearing the arguments in detail on the 21st. This is after the Centre took a firm stand that it can grant permission to Kerala to take a loan of 5000 crores and the state said that it needs at least 10000 crores.

It was Kerala that approached the Supreme Court accusing the central government of choking it financially. This is the first time that a state approached the apex court against the Centre in this regard. Hence, the interim verdict will gain national importance.

On Tuesday, a bench comprising justices Suryakant and KV Viswanathan had asked the Centre for a liberal approach to Kerala's demand that the central government should give permission to borrow another 19,370 crores.

Following this, the Centre told the court that it was ready to allow the state to borrow Rs 5000 crore, subject to centrain conditions. Additional Solicitor General N Venkataraman said that this amount will be deducted at the beginning of the next financial year. Kerala's borrowing limit for the first nine months of the financial year starting this April is 21,664 crores.

Kerala rejects Rs 5000 crore

Although the apex court asked Kerala to borrow R 5000 crore first, the state rejected the Centre's offer. Appearing for Kerala, senior advocate Kapil Sibal said that Rs 5,000 crore would not take the state anywhere and the absolute minimum requirement stood at Rs 10,000 crore. He said that the state was demanding only what it is entitled to borrow as per the Finance Commission's recommendation. He also asked the bench to list the matter next week.

"This is somewhat difficult for us. The note given by the Additional Solicitor General is on the assumption that our suit should be dismissed. Therefore, they are giving up some borrowing to be adjusted in the next financial year and also controlling our expenditure. That can’t possibly be the basis because Rs 5,000 crore does not take us anywhere. The absolute minimum is Rs 10,000 crore and without any adjustment,” Sibal said.

The ASG then said the Centre was also ready for the hearing, after which the court listed the matter for March 21.

Centre points out Kerala's Plan B
On Wednesday, the Additional Solicitor General told the court that Finance Minister KN Balagopal had said during the assembly budget speech that Kerala has a plan B to solve the financial crisis. However, Kerala did not respond. The Additional Solicitor General said that one of the conditions will be that the consent for borrowing in 2024-25 will only be issued on receipt of prescribed information and documents from the Kerala government and the state shall submit the plan B it has announced in its budget for the financial year for raising resources and improving the fiscal position.