THIRUVANANTHAPURAM: With the Centre tightening its grip on the borrowing limit and bringing the welfare and development projects to a standstill, the state government is on the stand that it will go to any lengths to overcome the crisis. Kerala is exploring the possibility of not only a political battle but also a legal battle in the Supreme Court.

Yesterday, Kerala Finance Minister KN Balagopal raised the argument that the Centre's decision to consider the debt incurred by the state through KIIFB and others as public debt is unconstitutional. He also wrote an open letter to Union Finance Minister Nirmala Sitharaman to convey the depth of the crisis that Kerala is in. Chief Minister Pinarayi Vijayan also questioned the central action in a press conference.

In his letter, Balagopal has contended liabilities of state instrumentalities, like statutory bodies and companies, do not come within the definition of state debt.

Therefore, combining debt of such entities with that of the state government is contrary to the provisions of the Constitution and would ''imperil'' the borrowing powers of the states and ''jeopardise'' their development plans, he said in his letter dated July 22.

He requested Sitharaman to exclude balances in the public account of the states and borrowings by entities run by them while determining their net borrowing capacity, as was the situation before August 2017, in view of the grave financial crisis Kerala was facing.

"The financial health of the state has been seriously affected by a reduction in the revenue deficit grant to the tune of around Rs 7,000 crore this year and loss due to stoppage of GST compensation of around Rs 12,000 crore. In addition, the Ministry of Finance has arbitrarily, in the name of off-budget borrowing made a reduction of approximately Rs,4000 crores in the net borrowing limits of the State. In all the State Government will have to contend with a reduction of Rs 23,000 crore in the financial resources available to it for financing the budget in the current financial year," Balagopal said.