Centre rejects Kerala's request to borrow Rs 19,370 crore

The Centre notified Kerala on Friday (March 8) that it couldn't approve the state's request to borrow an extra Rs 19,370 crore.

This was conveyed by the union finance secretary to a team of officials from Kerala led by Chief Secretary V Venu during their meeting in New Delhi.

Talking to reporters, Venu said they met the central government officials as per the directions of the Supreme Court and placed a request before them seeking to borrow Rs 19,370 crore.

He said the reasons for the additional amount sought for the state were presented before the apex court during the hearing.

"Our request was examined by the union finance secretary. However, he was not ready to agree to it," Venu said.

A state finance ministry source said that the state was indeed eligible for borrowing an additional amount of Rs 19,370 crore.

"Our request to the central government was to rectify an error in the calculation of the borrowing space allocated to the state of Kerala. The state has accepted the calculation based on principles endorsed by the central government.

"However, it was discovered that the borrowing space allotted to the state government was erroneously reduced by the central government. The request from the state government today was to rectify this mistake," the source told PTI.

Earlier, the Centre had informed the court that it was going to release over Rs 13,000 crore to the state straightaway.

The state government has said that it was eligible for Rs 13,000 crore this year.

The meeting was held after the Supreme Court on Wednesday advised the Centre and the Kerala government to iron out their differences on a cap on net borrowing by the state. The apex court made the observation while it was hearing a suit filed by the Kerala government accusing the Union of India of interfering in the exercise of its "exclusive, autonomous and plenary powers" to regulate the state's finances by imposing a ceiling on borrowing.

The dialogue between the Centre and the state must not stop merely because of the pending suit, the court had said while stressing on the need to resolve the issue.

The Kerala government had told the top court on February 19 that a meeting held on February 15 failed to make much headway in resolving the contentious issue.

In an original suit filed under Article 131, the Kerala government has said that the Constitution bestows fiscal autonomy upon states to regulate their finances under various articles, and the borrowing limits are regulated by a state legislation.

In a note submitted before the top court, the Centre had said that uncontrolled borrowing by states would affect the credit rating of the whole country, and that the "fiscal edifice" of Kerala has been "diagnosed with several cracks". 

(With agency inputs)