Centre accounts for approx 60% of total liabilities of India, all states put together for rest 40%, Kerala tells SC

Replying to the Centre’s note, the state government said that Kerala accounts for a miniscule 1.70-1.75 per cent of the total debt of the Centre and the states put together for the period 2019-2023. 

Kerala said that the note submitted on behalf of the Attorney General – the highest law officer of the Centre – relies upon selective and incomplete concepts on Indian public finance management and does not touch upon the very serious constitutional issues raised in its suit. 

"Regrettably, the note seems to be intended to divert the attention of this suit from the substance of the legal issues raised in the plaint," it said, adding that the Union government cannot assume a role or seek to exercise powers that are extra-constitutional or violate provisions of the Constitution. 

The reply affidavit filed by the state stressed that under pretext of "sound public financial management", the Union government cannot violate or encroach upon the plenary powers of the states granted under the Constitution. 

"Encroachment into the exclusive legislative and executive domains of the states cannot be justified on the basis of any theory of necessity, impact on the national economy, potential abuse of powers by the states, or the fact that states have a certain level of dependence upon the Union in certain respects and may be considered to be subsidiary to the Union in such respect." 

Kerala’s affidavit alleged that the Union government, without conforming to the Finance Commission recommendations, is expected to close this year with a borrowing of Rs.11.80 lakh crores in 2023-2024 - far beyond what it should have borrowed if it had complied with the recommendations of the Fifteenth Finance Commission. 

It added that the borrowing of all states and Union Territories of Rs.7.22 lakh crores will be well within the combined limit prescribed by the Finance Commission. 

Responding to an original suit filed by Kerala raising grievance over the Centre’s interference with the state’s power to borrow and regulate its own finances, Attorney General R. Venkataramani, in a written note, stated: "Kerala has been one of the most financially unhealthy States and its fiscal edifice has been diagnosed with several cracks ... Squeezed for funds for capital expenditure and to circumvent borrowing limits ... Kerala has resorted to substantial off-budget borrowings through the Kerala Infrastructure Investment Fund Board (KIIFB)." 

As per the details published on the website of the apex court, a bench of Justices Surya Kant and K.V. Viswanathan will take up the matter for further hearing on February 13 and decide the application filed by the plaintiff state seeking interim relief. 

In a suit filed under Article 131 of the Constitution, the Kerala government has raised questions over the authority of the Union government to interfere with the powers of the state to regulate its own finances under several provisions of the Constitution.