Kochi: The Kerala government has taken its grievances against the alleged interference by the central government in the state's finances to the Supreme Court. The state argues that such interference hinders its ability to fulfill commitments in its annual budgets. According to the suit filed by the Kerala government, it emphasized that the state government exercises executive power under Article 293 of the Constitution of India to borrow on the security or guarantee of the consolidated fund of the state, aligning with the fiscal autonomy guaranteed in the Constitution.

In its petition, the Kerala government contended that the Ministry of Finance (Public Finance-State Division) and the Department of Expenditure, through letters in March and August 2023, along with amendments to Section 4 of the Fiscal Responsibility and Budget Management Act, 2003, sought to interfere with the state's finances by imposing a Net Borrowing Ceiling. The state government argued that such interference limits borrowings from all sources, including open market borrowings, and reduces the Net Borrowing Ceiling by including aspects that are not considered "borrowings" under Article 293 of the Constitution. This includes deducting liabilities from the Public Account and deducting borrowings by state-owned enterprises.

The Kerala government highlighted that due to this interference, the state is unable to fulfill commitments in its annual budgets, resulting in significant arrears owed for welfare schemes, particularly affecting the poor, vulnerable groups, state employees, pensioners, and state-owned enterprises. The government asserted that a sum of INR 26,226 crores is urgently required to avert an impending financial crisis caused by the imposed borrowing ceilings. The state argued that the central government's actions violate fiscal federalism principles and the state's exclusive powers to regulate its finances under the Constitution.

The suit presented by the Kerala government raises concerns about the authority of the central government to interfere with the state's powers to regulate its finances, asserting that it violates constitutional provisions and principles of fiscal federalism.

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