The Union Government has said that it is willing to consider allowing Kerala to borrow additional money of Rs 11,731 crore in view of its current precarious financial situation, but only if the state government withdraws the case against the Union government. According to the Live Law report, the Kerala government relayed this ‘condition’ to the Supreme Court on Monday, February 19, and rejected the Union’s proposal. The state has claimed it is eligible for about Rs 17,000 crore more.

In December last year, the Kerala government had filed a plea in the Supreme Court against the Union’s decision to limit the amount of additional money the state can borrow. The Kerala government alleged it violated the principles of fiscal federalism. The state’s petition also alleged that the Union government’s action could lead to a financial crisis. 

For the current financial year, the Union government fixed a borrowing limit of Rs 47,762.58 crore for Kerala. Out of this, Rs 29,136.71 crore is open market borrowing and the remainder from other sources. According to live law, the state requested the Union to allow additional borrowing, and stated that it required Rs 26,000 crore to meet its financial obligations.  

Representatives of the State and Union governments met on February 15 to discuss the matter. According to the senior advocate, Kapil Sibal, who is appearing for the Kerala government, the discussion was not successful. He also informed the SC about the Union’s proposal.

On February 8, the Kerala government under the leadership of Chief Minister Pinarayi Vijayan had organised a protest in New Delhi against the financial curbs imposed by the Union government on southern states, alleging that they are eroding democracy and federalism. The event received support from many parties across the political spectrum.