Rs 5000 Cr Not Enough, Need At Least 10,000 Cr: Why Kerala Rejected Centre's Offer In SC

Centre told the apex court that it is ready to allow the Kerala govt to borrow Rs 5,000 crore, subject to certain conditions, to deal with the financial issues facing the state as an exceptional case.

The Kerala government has filed a suit in the top court under Article 131, accusing the Centre of interfering with its powers to regulate the state's finances by imposing a ceiling on borrowing.

Source : PTI

The Kerala Government on Wednesday told the Supreme Court that it will not accept the Centre's offer to allow it to borrow Rs 5,000 crore with conditions and it needed at least of Rs 10,000 crore.

A bench of Justice Surya Kant and KV Viswanathan on Tuesday asked the Centre to file its response to the top court's suggestion for allowing a one-time package as a special case to Kerala. The bench had asked Centre that it may put more rigid conditions in future budgets and, in the meantime, a special package should be given to the state before March 31.

On Wednesday, the Centre told the apex court that it is ready to allow the Kerala government to borrow Rs 5,000 crore, subject to certain conditions, to deal with the financial issues facing the state as an exceptional case.

Senior Advocate Kapil Sibal appearing for the Kerala government said Rs 5,000 crore does not take us anywhere and the state's absolute minimum requirement stood at Rs 10,000 crore.

Why Kerala Government Went To SC Against Centre?

The Kerala government has filed a suit in the top court under Article 131, accusing the Centre of interfering with its powers to regulate the state's finances by imposing a ceiling on borrowing. However, the Centre has maintained that unregulated borrowings by states would affect the credit rating of the entire country.

Sibal pressed the court that the case should be heard on merits and refused to accept the Centre's offer. He said that under the recommendations of the Finance Commission, the state is entitled to this money. He rejected the offer on state's behalf saying that the Centre is making such a suggestion on an assumption that Kerala's case is not maintainable.

What Is Centre's Offer To Kerala?

ASG N Venkataraman, told the court that to help Kerala deal with its financial crisis and meet the end of the financial year liability of payment of pension, salary and other committed expenditure the Centre is ready to give a consent for a borrowing of Rs 5,000 crore by the state subject to some conditions.

In a note placed in court, the ASG said that Rs 5,000 crore will be deducted from the net borrowing ceiling of Kerala for the first nine months of FY 2024-25. He further said that the state will not be allowed any no ad-hoc borrowing for FY 2024-25.

He further said that Centre will consent to Kerala's borrowing in 2024-25 when Kerala submits the prescribed documents and the Plan B it has announced in its budget for improving its fiscal position.

The ASG also said that the Centre will give consent for borrowing to Kerala in the first nine months of FY 2024-25 on a quarterly basis for upto 25 percent of the eligibility arrived. And the special concession of Rs 5000 crores, will be deducted from it.

The Centre has contended that if the Rs 15,000 crore borrowing demand by Kerala is allowed in advance in March 2024, the state will be left with a borrowing space of only Rs 6,664 crore to meet its requirements for the first nine months of 2024-25.

The ASG appearing for Centre in court said that if one looks at expenditure trends by Kerala, it will become extremely difficult for the state to manage its finances with the borrowing of Rs 6,664 crore in the first nine months of financial year 2024-25. He cited figures from FY 2023-24, and said that Kerala was allowed a total borrowing consent of Rs 21,852 crore for the first nine months with an average amount of Rs 2,428 crore per month. However, this was exhausted by Kerala within the first six months with an average expenditure of Rs 3,642 crore per month.

What Next?

Agreeing to Kerala's demand, the top court will now hear the maintainability of the suit for interim relief on March 21.