The Supreme Court on Monday refused to grant interim relief to allow Kerala to borrow more money. The 15th Finance Commission had imposed a net borrowing ceiling (NBC) and it has been fixed at 3% of GDP for the financial year 2023-24. The Kerala government accused the Centre of using its “exclusive, autonomous and plenary powers” to regulate Kerala’s finances. As of now, Kerala is suffering from a financial crisis where millions of government workers are left unpaid because of the lack of funds with the state.
The bench of Justices Surya Kant and K V Vishwanathan held that Kerala failed to establish three judicial prongs – proving prima facie case, balance of convenience and irreparable injury. Due to this, the state wasn’t entitled to the interim injunction on the borrowing cap.
“If the state has essentially created financial hardship because of its own financial mismanagement, such hardship cannot be held to be an irreparable injury that would necessitate an interim relief against the Union. There is an arguable point that if we were to issue an interim mandatory injunction in such cases, it might set a bad precedent in law that would enable the states to flout fiscal policies and still successfully claim additional borrowings,” the bench said.
The Supreme Court also noted that the state had already got relief from the Centre when the Centre released Rs.13608 crores. This SC ruling was a setback for Kerala. The LDF (left democratic front) had always made these allegations on the Centre that they are strangulating the state by not providing enough funds, but this claim also went for a toss when the SC pointed out the mismanagement of funds by the Pinarayi Vijayan government. SC also noted that there was no “irreparable damage” to the state by the Centre’s actions.
Kerala’s Financial Mismanagement
Kerala’s borrowing limit for the year was set at Rs.32,442 crores which was reduced by Rs.3140.70 crores due to overborrowing in the previous terms.
The financial commission permitted the state to borrow up to 75% of the available limit in the first 9 months of the fiscal year but somehow Kerala crossed this limit in the first 6 months, so now the state requires 15000 crores more than the limit to just run the state.
One major reason which led to the financial crisis is the spendthriftness of the state. Kerala government’s capital outlay, i.e., capital expenditure as a total of the budget stands at 8.20% which is less than Tamil Nadu and Maharashtra. The committed expenditure (compulsory spending despite the situation) was 70% which is very high and risky. The government spending on interest payments was 19.98% while other states paid only 13.38%.
All these economic indicators paint a dark picture of the government’s financial management. Kerala’s situation is worsening, and SC’s verdict doesn’t make it any better for the state.
