SC intervenes for Kerala’s economic relief, suggests one-time package

The Supreme Court has directed the Central government to consider extending a one-time financial package to the Kerala state government by March 31st to address its pressing financial challenges.

During a hearing on Tuesday, the Kerala government, represented by senior advocate Kapil Sibal, urgently sought the court's intervention regarding its pending lawsuit against the central government. The state highlighted that necessary funds were not being released by the Union, exacerbating its financial strain.

A bench comprising justices Surya Kant and KV Viswanathan agreed to prioritize the state's plea and scheduled a hearing for Wednesday. The bench emphasized the need for the Centre to adopt a more lenient approach and provide Kerala with a special one-time package before the end of March, acknowledging the financial constraints faced by the state.

Additional Solicitor General N Venkataraman, representing the Centre, underscored the cumulative impact of the offsetting balance on Kerala's finances, noting that the state had deferred fiscal consolidation twice. He expressed the government's limitations in addressing the issue effectively.

In response, the bench acknowledged the complexity of the situation, indicating that it was not within their expertise to provide a definitive solution. However, it reiterated the importance of addressing fiscal mismanagement by states, which could potentially impact the nation's economy.

The court's observations came in the backdrop of a lawsuit filed by the Kerala government under Article 131, asserting its autonomy to regulate state finances without undue interference from the Union government. The state argued that borrowing limits were within its jurisdiction and regulated by state legislation.

The Centre, in a note submitted to the court, raised concerns about uncontrolled borrowing by states affecting the country's credit rating and highlighted various fiscal challenges faced by Kerala.