SC urges Centre for Kerala relief package to deal with financial woes

New Delhi: The Supreme Court on Tuesday, urged the Centre to consider offering a one-time financial package to Kerala by March 31 to address its fiscal challenges.The Kerala government, represented by senior advocate Kapil Sibal, mentioned its pending lawsuit against the central government for urgent hearing before a bench comprising justices Surya Kant and KV Viswanathan, saying that the Union was not releasing necessary funds.

The bench agreed to hear the plea on Wednesday and said the Centre can be “slightly liberal and give a one-time package as a special case” to Kerala.

The bench said more rigid conditions may be put in future budgets and, in the meantime, a special package be given to the state before March 31.

Additional Solicitor General N Venkataraman, appearing for the Centre, said the offsetting balance is having a cumulative effect on Kerala’s finances and the state deferred fiscal consolidation twice. Offsetting balance is a minimum credit balance that a bank may require a borrower to keep in deposit as a condition for granting a loan. The bench had said on March 6 that fiscal mismanagement by states is an issue the Union government has to be concerned about as it impacts the nation’s economy.It had advised the Centre and the Kerala government to iron out their differences on a cap on net borrowing by the southern state.

The apex court had made the observation while it was hearing a suit filed by the Kerala government accusing the Union of India of interfering in the exercise of its “exclusive, autonomous and plenary powers” to regulate the state’s finances by imposing a ceiling on borrowing.