Supreme Court To Hear Kerala's Fund Allocation Dispute Amid Stalled Negotiations

The Supreme Court said on Monday that it will hear the plea filed by the state of Kerala, accusing the Centre of imposing an arbitrary 'net borrowing ceiling' on the state.

The top court will accord an in-depth hearing to the case on March 6.

Appearing for the state of Kerala, senior advocate Kapil Sibal said that the Centre is asking the state to withdraw the suit filed before the top court so that it can be considered for the amount that it is entitled to.

To this end, Additional Solicitor General N. Venkatraman said that it is unreasonable to litigate and negotiate simultaneously.

During the last hearing, the top court was apprised by the Centre that it was open to a dialogue with the southern state to resolve the net borrowing cap issue. However, the negotiations seem to have come to a standstill.

The case pertains to a plea filed by the state of Kerala against the Centre, accusing it of imposing a 'net borrowing ceiling' on the state, which limits the state's borrowings from all sources, including open market borrowings.

It has been pleaded that in order to meet the fiscal deficit, states regularly plan their borrowing requirements and the ability to determine the borrowing of the state in order to balance the budget and make up for the fiscal deficit is exclusively within the domain of the states.

According to the plea, the reduction in borrowing limits will have an extremely deleterious impact and long-term economic damage to the state, which will be irremediable in the short or even medium term.

The plea further states that the state has suffered a cumulative expenditure loss or resource deficiency of nearly Rs 1.07 lakh crore during FY16–23.

It is estimated that over a period of the next five years, the net negative impact or loss sustained by Kerala's economy could be as high as Rs 2–3 lakh crore, reckoned with FY16–17 as the base year. This represents 20–30% of Kerala's current GDP over a six-year period, the plea contends.

During the last hearing, the Centre told the top court that it was open to discussion and dialogue with the Kerala government to resolve the dispute.