Supreme Court Suggests One-Time Bailout Package To Fix Kerala’s Financial Crisis
The centre, however, is unwilling to accept the top court's suggestion.
The Supreme Court on Tuesday urged the centre to consider giving the state of Kerala a one-time deal to fix its current financial crisis.
Appearing for the state of Kerala, Senior Advocate Kapil Sibal said that the state has accepted to borrow Rs 13,608 crore offered by the centre. However, the centre rejected the state’s additional borrowing demand, he said.
The court said that the centre could consider imposing stricter budgetary conditions on the state in the coming financial years and that the current crisis could be averted if a bailout package is granted to the state.
However, the centre was reluctant to accede to this suggestion and said that a bailout package would not be possible, as it had rejected the same for other states. “If we allow it for one state, we will have to allow it for everyone," it said.
The court said that it does not doubt the centre’s bona fide intentions to negotiate with the state and that it is only suggesting the bailout package as a one-time measure.
The matter was then adjourned for a day so that the centre's lawyers could seek instructions and will likely be taken up tomorrow, that is, on March 13.
The case pertains to a plea filed by the state of Kerala against the central government, accusing it of imposing a net borrowing ceiling, which limits the state's borrowings from all sources, including open-market borrowings.
According to the plea, the reduction in borrowing limits will have an extremely deleterious impact and cause long-term economic damage to the state, which will be irremediable in the short, or even medium term.
The state has suffered a cumulative expenditure loss or resource deficiency of nearly Rs 1.07 lakh crore during fiscal 2016–23, according to the plea.
It is estimated that over a period of the next five years, the net negative impact on Kerala's economy could be as high as Rs 2–3 lakh crore, with FY17 as the base year. This represents 20–30% of Kerala's current gross domestic product over a six-year period, the plea states.
