Supreme Court directs Centre to consider special package for Kerala as one time measure amid financial crisis

By Aishwarya Nair | First Published Mar 12, 2024, 12:45 PM IST

The Supreme Court on Tuesday (Mar 12) asked the Centre to consider a special package for Kerala amid the financial crisis in the state. The top court also asked to relax the borrowing limits for the current financial year.

New Delhi: In a major relief for Kerala, the Supreme Court on Tuesday (Mar 12) asked the Centre to relax the borrowing limits for the state for the current financial year before March 31, 2024 as a one-time measure as a special case. Despite initially raising objections to granting relaxations, N Venkataraman, the Additional Solicitor General for India, ultimately agreed to provide instructions from the government after some persuasion by the Court. He committed to returning tomorrow at 10:30 AM with the necessary information.

Also read: Centre declines Kerala's request for additional borrowing of Rs 19,370 crore

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The development occurred after Senior Advocate Kapil Sibal brought up Kerala's suit before a bench consisting of Justices Surya Kant and KV Viswanathan. Sibal informed the court that the negotiations between the State and the Centre, which took place on the Court's suggestion last week, had failed. Last week, the Centre declined Kerala's request to permit borrowing of Rs 19,351 crore.

In the previous hearing, the Court had urged the Union government to permit additional borrowing of Rs. 13,608 crores without requiring the State to withdraw the suit filed in the Supreme Court.

Kerala initiated the original suit against the Centre under Article 131 of the Constitution, challenging its norms on borrowing limits. The Court had previously recommended talks between the State and the Centre to seek a resolution.

Kerala in its petition stated that the state is reeling under a severe financial crisis and that there is a shortage of funds to disburse pension, dearness allowance, benefits, etc. There is a situation of overdraft. Kerala also informed that they only have money to pay salaries. The court emphasized the importance of addressing Kerala's financial crisis, affirming the right of individuals to petition for solutions.

The Supreme Court had previously urged the involved parties to resolve the matter through amicable discussions, acknowledging the court's limitations in financial affairs. Despite the Centre's offer to allow Kerala to borrow Rs 13,608 crores if the state withdrew its petition, Kerala remained steadfast in its demand for what it believes it rightfully deserves, expressing its intent to continue its legal pursuit.

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