The Supreme Court on Monday, 11th March, suggested that the Central government provide a one-time bailout package to the state of Kerala, which is reeling under a financial crisis.
Supreme Court asks Centre to give one time package to Kerala to bail out State from financial crisis#SupremeCourtofIndia #Kerala
— Bar & Bench (@barandbench) March 12, 2024
Read more: https://t.co/P4kYq9HShF pic.twitter.com/RsShbUjm1J
Deferring the matter to tomorrow, 13th March, at 10:30 am, the bench of Justices Surya Kant and KV Viswanathan said that the package can be given subject to strict conditions.
“You can be slightly liberal and give a one-time package as a special case. And more rigid conditions in future budgets … Before March 31 give them the special package. But subject to harsher conditions than other states. For the existing States you will be liberal next time (perhaps),” Justice Kant remarked to the counsel for the Central government.
SC: You can be slightly liberal and give a one-time package as a special case. And more rigid conditions in future budgets.
— Bar & Bench (@barandbench) March 12, 2024
Sibal: Yes it can be adjusted later
AG: My lords …
ASG: How can it be done? We decline to other States because of Union's problems.
SC: Before March…
The matter will be taken up on 13th March with the Centre and State government officials likely to hold a meeting before then.
Kapil Sibal represented the State of Kerala while Attorney General R Venkataramani and Additional Solicitor General N Venkataraman appeared for the Central government.
On Tuesday, the Kerala government sought an immediate release of Rs 19,000 crore that it claims the Centre owes it.
“The moment the Power Ministry says they have complied, it will be transferred. Bailout package is not possible under this scheme,” the ASG responded saying that the Centre cannot give any special treatment to Kerala.
Furthermore, it submitted that the Kerala government’s case is not a special one. “Theirs is not a special case … We have declined to other States. They do not even budget expenditures. 15 times more bailout sought than expenditure package,” the ASG said.
He said that the Centre’s hands are tied in the matter.
The AG said, “”Let them tell the court why they cannot pay … But to find a way out despite constraints, we are not at loggerheads.”
The Kerala government in its plea reportedly claimed that the Central government was interfering with the former’s power to borrow and regulate its finances.
The Pinarayi Vijayan government filed a suit in December 2023 alleging that the Centre had limited the state’s borrowings leading to an accumulation of unpaid dues and could result in a grave financial crisis.
As per reports, the state government failed to pay salaries to several of its employees for the month of February.
In mid-February, the Kerala government and Centre held talks to resolve issues concerning finance and budgeting.
Kerala’s financial crisis
The Kerala government has landed in an acute financial crisis in the recent years. Previously, during the course of the hearing, the Centre submitted to the Court that the Reserve Bank of India (RBI) has categorised Kerala as one of the five highly stressed states requiring urgent corrective measures.
As per reports, the CPM-led Kerala government’s expenditure has seen a significant rise. 78% of its revenue income has reportedly been spent in the fiscal year 2018-19. The fiscal deficit has escalated from 2.4% in 2017-18 to 3.1% in 2021-22.
The Centre has accused Kerala of negatively impacting India’s credit rating due to its state debt and warned that defaulting on debt servicing could create a reputation issue and a domino effect.
Unable to explain the situation, the Pinarayi Vijayan government has been on the offensive accusing the Centre of capping their borrowings.
