Thiruvananthapuram: The Kerala Cabinet on January 4 resolved to petition Prime Minister Narendra Modi against what it perceived as the Central Government's debilitating infringements on fiscal federalism. The state government has decided to submit a petition to PM on major central and state financial issues.
On Wednesday, the decision was made during the cabinet meeting. The petition is on the basis of issues related to deviations from constitutional provisions. The major Central and State financial issues will be addressed in the letter.
The state administration intends to petition the federal government to reinstate the borrowing limit for the state government to its pre-2017 position, according to a press release from the Chief Minister's Office (CMO). Key issues facing the state which are not in line with federal principles will be brought to the attention of the PM in the form of a petition.
The amoaunt set aside in the public account will be counted toward the state's public debt for determining the self-borrowing cap in 2017, the central government ruled. This was a misinterpretation of Article 293(3) of the Constitution, a statement of the CMO read.
Accordingly, when issuing a consent letter for borrowing under Article 293(3), the central government stipulated that loans repaid by state public sector companies, corporations, and special purpose entities through the state budget or through the state tax/cess/any form of state revenue earmarked for them shall be considered as debt taken by the state.
The State Government does not directly owe money for loans taken out by Public Sector Entities that are supported by Government Guarantees. They can only be viewed as potential state liabilities. Several institutions with special purposes run by the state government, include KIFBI and KSSP. The Central Government has now added all borrowings to the State Government's public debt. However, it does not apply to loans taken out by PSUs and other institutions of the central government.
According to the CMO's news statement, This act is a violation of federal principles and is a hindrance to the development of the state.
In light of this, the state has asked the federal government to reconsider its decision to include reserves and loans taken by businesses under the authority of the state government in determining the state government's borrowing limit and returning things to as they were before 2017.
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