Supreme Court issues notice on plea by Kerala alleging interference by Centre in State's finances, budgeting

The Supreme Court on Friday sought the response of the Central government to an original suit filed by the Kerala government raising grievance over the Centre allegedly interfering with the State’s power to borrow and regulate its own finances..A Bench of Justices Surya Kant and KV Viswanathan also issued notice on the interim relief application, returnable on January 25. .Senior Advocate Kapil Sibal appeared for the Kerala government and emphasised that the borrowing limits were affecting the State's ability to release salary payments, among other things..The Bench was hearing the plea filed by the Kerala government in December, where it has alleged that the Central government has "taken control over its budgeting process" through executive actions.The State government in a suit moved under Article 131 of the Constitution through its Chief Secretary underscored that imposition of the borrowing ceiling by the Union government has led to an accumulation of unpaid dues over the years and could lead to a grave financial crisis.The State contended that the imposition of a Net Borrowing Ceiling as deemed by the Union government, limits borrowings from all sources including the open market and thus curtails the exclusive constitutional powers of the State.The ability to determine the borrowing of the State in order to balance the budget and make up the Fiscal Deficit is exclusively within the domain of the states, the Kerala government added..In particular, the State government objected to the directions issued by the Ministry of Finance through letters written in March and August 2023 and also challenged the amendments to Section 4 of the Fiscal Responsibility and Budget Management Act, 2003 through the Finance Act, 2018.The directions issued through the letters create unconstitutional limits and impediments on the State to borrow and regulate its own finances, the government argued.The State government has suffered a cumulative expenditure loss or resource deficiency of ₹1,07,513.09 crore over Fiscal Years 2016-2023 due to such actions of the Central government, the top court was told.Due to this, the State said that it has not been able to fulfil the commitments made in its annual budgets. .While many States have approached the Supreme Court in recent months against their respective Governors' inaction on bills passed by state assemblies, Kerala is the second State to move the top court in recent times in relation to a financial dispute with the Central government.Earlier, the Punjab government filed a suit against the Central government over the non-reimbursement of statutory fees allegedly running into over ₹4,000 crore that the State government had levied on behalf of the Central government during the procurement of food grains.