Financial crisis: Supreme Court asks Centre to consider giving special package to Kerala

A bench of the apex court said more rigid conditions may be put in future budgets.

New Delhi: The Supreme Court on Monday suggested the Centre to be slightly liberal and consider providing a one-time package to Kerala, to rescue the state from its current financial crisis.

A bench of Justices Surya Kant and KV Viswanathan said the court is not an expert in the financial matters, while asking the central government to explore the possibility of a middle path. 

The bench told the Centre’s counsel that the government could be slightly liberal and give a one-time package as a special case. 

“Before March 31 give them the special package subject to harsher conditions than other states. For the existing states you will be liberal next time (perhaps),” the bench observed.

Senior advocate Kapil Sibal represented Kerala before the apex court. Attorney General R Venkataramani and Additional Solicitor General N Venkataraman appeared for the central government.

Sibal contended that the state had accepted the Centre’s proposal to borrow an additional Rs 13,608 crore for the time being, however its request for an additional Rs 19,000 crore was not considered.

The Centre said that it cannot give any special treatment to Kerala.

In this matter, Centre’s hands are tied, the ASG said as he contended that Kerala’s issue is not a special case and the government has declined other states.

The apex court suggested that both Kerala government and the Centre should work out an interim solution. The bench further suggested that a special concession could be given to Kerala by the central government for now.

On the aspect of one-time exception for Kerala, the Centre’s counsel said that the step would end up dividing states based on their approaching courts.

The ASG said the government will place all the materials before the court, including the request for a bailout package by another southern state which wrote to the government in January. 

“In this case, the request for a bailout package is more than 100% of their budget package...the mismatch is huge. We can show that we have declined similar requests for many other states, and it is not that we are against this particular state,” the ASG said.

"We do not have the slightest doubt on Centre’s bona fide that you would not want to help the state,” the court said. 

"We are asking you to explore the possibility of doing something for the current financial year and the amount can be set off from their entitlement in the first quarter of the next financial year,” the bench added. 

The court insisted that Centre could explore doing something as a special case.

The Centre’s counsel said that they would discuss the matter with competent authorities and come back in relation with the court’s suggestion. 

The court fixed the matter for further hearing on Wednesday.

In the previous hearings in the matter, the apex court had asked the state and Centre to hold discussions to resolve the issues. A meeting was held between the officials but the issue remains unresolved.

The Kerala government filed an original suit under Article 131 of the Constitution through its chief secretary alleging that the Union government has "taken control over its budgeting process" through executive actions. 

The state government alleged that the Union is interfering with its power to borrow and regulate its own finances and also claimed it has no money to clear outstanding arrears of salaries, pension, and provident fund for state employees and for other beneficiaries in the state under various welfare schemes.

The Centre claimed that the financial edifice of Kerala has several cracks. The Centre has brought on record statistics to show the revenue deficit in Kerala as a percentage of gross state domestic product (GSDP) to be 3.17% for 2021-22, higher than the all-states average of 0.46%, and the fiscal deficit rate for Kerala to be 4.94% compared to an all-state average of 2.80 per cent.