The Supreme Court has asked the Union Government to consider easing Kerala’s borrowing limit for this year, before March 31, 2024, as a one-time measure. They suggested that stricter conditions could be applied next year. A two-judge bench of Justices Surya Kant and KV Viswanathan heard the matter. At first, the Additional Solicitor General of India, N Venkataraman, disagreed with relaxing the limits but later agreed to come back with instructions from the Government after the Court insisted.

Senior Advocate Kapil Sibal had informed the court that talks between Kerala and the Union, suggested by the Court earlier, had failed. Last week, the Union had denied Kerala's request to borrow Rs 19,351 crore. In the previous hearing, the Court had convinced the Union to allow Kerala to borrow an additional Rs 13,608 crores without requiring the state to withdraw its lawsuit against the Union regarding borrowing limits.

Justice Kant clarified that they don't doubt the Union's intention to help Kerala but raised concerns about the financial strain. The ASG mentioned that another southern state had asked for a bailout of Rs 25,000 crores, which was also refused by the Union. Justice Kant suggested temporarily easing the rules for Kerala until March 31 and then making them stricter next year. 

“On 14 other occasions with different states and different political parties, we have said we cannot give a bailout package...as a matter of principle. If we allow it for one state, we will have to do it for everyone...we have already done our best in so far Kerala is concerned,” the ASG submitted.

The bench remarked: “We don’t have the slightest doubt on your bona fide that you would not want to help the state. 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...Do something as a special case.”

Ultimately, the ASG agreed to consult the Government and report back the next day. 

The Kerala government has approached the court, stating that it lacks funds to pay pending salaries, pensions, provident fund dues for state employees, and to support various welfare schemes.

On March 6, the court proposed that Kerala should agree to the Union's offer to borrow an extra Rs 13,608 crore for the time being, with certain conditions. However, it insisted that the Union shouldn't demand Kerala to withdraw its lawsuit as a condition for this additional borrowing.