On 13 February,2024, the Central Government informed the Supreme Court of its readiness to engage in discussions with the Kerala government concerning financial matters. Attorney General R. Venkatramani conveyed to the bench comprising justices Surya Kant and KV Vishwanathan that the Union Government is amenable to holding talks with the Kerala Government. Venkatramani also noted that this decision was made considering the court’s suggestions regarding the potential meeting between the Central and state authorities.
Senior Advocate Kapil Sibal, representing the Kerala Government, informed the court that a delegation from Kerala could arrive the following day, proposing that the meeting could occur on Wednesday. Sibal also mentioned the unavailability of the state’s finance minister due to budgetary commitments in Delhi. The Attorney General assured the court of facilitating the meeting.
The court instructed both the Central and State governments to identify the agenda for discussion. The matter was scheduled for further hearing the following week.
In an earlier affidavit, the Kerala Government highlighted that approximately 60% of India’s total debt or outstanding liabilities are accounted for by the Central Government. The affidavit challenged the Union Government’s ability to regulate the state’s borrowing, labeling the justifications provided as flawed, exaggerated, and unjustified.
In a note submitted to the Supreme Court, the Attorney General emphasized Kerala’s precarious financial situation, citing criticism from various financial bodies, including successive Finance Commissions and the Comptroller and Auditor General (CAG).
In response to Kerala’s assertions, the Centre, in its affidavit, informed the court of Kerala’s significant financial challenges, asserting that the state’s fiscal health is among the weakest in the country.
The Attorney General further emphasized in a written submission that the debt of states affects the nation’s credit rating. This submission came in the context of Kerala’s petition against alleged interference by the Centre in the state’s financial matters, which purportedly obstructed the state from meeting its budgetary commitments.
Kerala’s lawsuit argued that the state’s executive power, as per Article 293 of the Indian Constitution, allows it to borrow against the Consolidated Fund of the State, ensuring fiscal autonomy. The petition further alleged that the Centre, through the Ministry of Finance, attempted to constrain the state’s finances by imposing borrowing limits, thereby impeding its fiscal autonomy.