Kerala: Pinarayi Vijayan Govt Moves SC Against Centre's 'Interference' Into State Finances

The plea said that the State has the constitutional power to legislate on its Borrowings as empowered under Article 199 and manage the same in accordance with the Constitution.

The Kerala government filed an original suit before the Supreme Court alleging interference by the Centre with the State's finances. The suit initiated by the state government raises concerns about the Union government's authority to meddle with the State's autonomy in regulating its finances, as outlined in various provisions of the Constitution.

The petition alleged that the Union Ministry of Finance, through issued letters in March 2023 and amendments to Section 4 of the Fiscal Responsibility and Budget Management Act, attempted to encroach upon the State's financial autonomy. This interference included the imposition of a Net Borrowing Ceiling and a reduction in the Net Borrowing Ceiling, thereby encompassing elements within the State's "borrowing" that do not align with the definition of "borrowings" as envisioned under Article 293 of the Constitution, according to a report on IANS.

It added that the Union government imposed conditions in the guise of exercise of powers under Article 293(3) read with Article 293(4) that curtails the exclusive constitutional powers of the State.

Moreover, it emphasized that the State possesses exclusive authority to oversee its finances by formulating and managing its budget and borrowing and “the reduction in borrowing limits will have an extremely deleterious impact and long-term economic damage to the State.”

“The Defendant through the Impugned Amendments has encroached into the legislative domain of the Plaintiff State as “Public Debt of the State” is an item exclusively in the State List in the Seventh Schedule under Article 246 of the Constitution,” the plea said.

The statement highlighted that the contested orders and amendments establish unconstitutional constraints and obstacles on the State's ability to borrow and autonomously manage its finances, thereby infringing upon the provisions and principles of fiscal federalism as outlined in the Constitution.

The plea added that the State has the constitutional power to legislate on its Borrowings as empowered under Article 199 and manage the same in accordance with the Constitution.