Supreme Court issues summons to Centre on Kerala’s suit alleging financial curbs
- The Supreme Court has agreed to examine an original suit filed by Kerala, alleging that the Centre's interference with the state's finances is violating the federal structure of governance
Key Highlights
Legal Summons and Interim Reliefs:
- Kerala seeks interim reliefs, including an injunction against the Centre from restricting the state's borrowing of ₹26,226 crore.
- Kerala argues that, in a federal system, a state has exclusive power to regulate its finances through budget preparation and management.
- Recent actions, amendments, and executive orders by the Centre are seen as attempts to reduce Kerala to financial distress.
Allegations of Arbitrary Borrowing Restrictions:
- The state contends that the Centre imposed a net borrowing ceiling arbitrarily, limiting borrowings from all sources, including the open market.
- Deductions from state-owned enterprises' borrowings and imposed conditions on foreign loans are cited as measures causing financial strain.
- Kerala claims that amendments to the Fiscal Responsibility and Budget Management Act, 2003, infringe upon the state's legislative domain.
- These changes allegedly violate fiscal federalism by imposing unconstitutional limits on the state's ability to borrow and regulate its finances.
Prelims Takeaway
- Fiscal deficit
- Fiscal Responsibility and Budget Management Act, 2003