A day ahead of the protest in Delhi led by Kerala Chief Minister Pinarayi Vijayan, the Union government, on Wednesday, February 7, in a note filed before the Supreme Court said there were multiple studies documenting poor public finance management by Kerala.
The note by Attorney General (AG) R Venkataramani named Kerala as one of the most financially unhealthy states whose fiscal edifice has been diagnosed with several cracks. It also said that “squeezed for funds” for capital expenditure and to circumvent borrowing limits, “Kerala has resorted to substantial off-budget borrowings through the Kerala Infrastructure Investment Fund Board (KIIFB)."
The written note came in response to an original suit filed by Kerala raising grievance over the Union government allegedly interfering with the former’s power to borrow and regulate its own finances. The state in its plea alleged that the Union government's actions can lead to a grave financial crisis, as the state has not been able to fulfill the commitments made in its annual budgets. A bench of Justices Surya Kant and KV Viswanathan is set to take up the matter on February 13 and decide on Kerala's interim relief application.
The AG in his note further highlighted several financial indicators of Kerala in support of his contentions including high levels of debt-Gross Domestic Product (GDP) ratio, interest payments to revenue receipts ratio, gross fiscal and revenue deficits, share of provident funds in its outstanding liabilities and pay/pension payments.
"Despite the devolution of substantial resources from Central taxes and duties, highest share of post devolution Revenue Deficit Grant, financial support extended by the Union Government over and above the recommendations of the Finance Commission and substantial transfer of resources to the State Government under the Centrally Sponsored Schemes, any financial stress that the Government of Kerala is facing is purely due to its own financial mismanagement," read the AG’s note.
Kerala is the second state after Punjab to move the apex court in relation to a financial dispute with the Union government.