Money Matters: Kerala’s Fiery Critique on Centre’s Loan Conditions

In the political landscape of Kollam, Kerala Finance Minister K N Balagopal voiced strong criticism on Monday regarding the Center’s stipulation that the state could borrow funds only upon withdrawal of its case before the Supreme Court. Balagopal decried this stance as “highly disappointing” and deleterious to fiscal federalism. Addressing the media, he asserted that the Center had communicated to the apex court that immediate permission to borrow approximately Rs 12,000 crore would be granted if Kerala rescinded its petition on that very day.

“The case filed by the state government in the Supreme Court seeks the rightful allocation of funds,” he expressed. “The position taken by the Union government is profoundly disheartening, with potential repercussions for the fiscal federalism and day-to-day operations of the state government,” Balagopal lamented.

Elaborating on the legal proceedings, he stated, “Our legal representative, Kapil Sibal, articulated our position, emphasizing our pursuit of the funds rightfully owed to us. Our petition is grounded in our constitutional rights. However, they insist on our withdrawal, a demand tantamount to injustice,” the minister added.

In response to the Supreme Court’s suggestion during a hearing on February 15, a meeting convened in the national capital. The meeting addressed the petition filed by the Kerala government, accusing the Center of encroaching upon its “exclusive, autonomous, and plenary powers” in regulating the state’s finances through the imposition of a borrowing ceiling.

On Monday, the apex court advised the Kerala government to “mentally prepare itself,” hinting at potential inability to issue an interim order favoring their plea against the Center’s interference in the state’s finances through borrowing restrictions.

“This legal conundrum is purely financial. To what extent can the court intervene, especially through an interim order?” the bench questioned, adding, “Prepare yourself mentally, Kerala, for the likelihood that we may not be able to grant an interim order. We lack expertise in this subject matter.”

Sibal asserted that Kerala’s claim exceeds Rs 24,000 crore, while their entitlement stands at Rs 11,000 crore. However, the Center insists on the withdrawal of the suit before considering the entitlement. “Must we be penalized for asserting our financial rights through legal recourse?” Sibal queried.

The court has now scheduled the matter for listing on March 6, directing both the Kerala and Union governments to maintain open channels of negotiation to resolve the dispute.