Done asking, pleading, demanding, South states take legal recourse for Central funds

Southern states – all of them currently not ruled by the BJP – have often accused the Narendra Modi government of "step-motherly treatment" when it comes to allocation of funds.

Even as the BJP hardsells "double-engine sarkar", meaning having the same party rule both state and Centre for better governance, Opposition parties have pointed out the Union government should allocate funds to all states evenly, irrespective of which party is ruling it.

The Congress has accused the Centre of indulging in 'confrontational federalism' rather than cooperative federalism.

Having asked and pleaded for funds, and demanded it as a right under the federal system, three southern states have hit the legal route – through separate lawsuits – for redress. Karnataka, Kerala and Tamil Nadu have moved the Supreme Court in recent months, asking it to direct the Centre to release funds that are due to them.

Funds for calamities

Among these three states, Tamil Nadu and Karnataka have sought the release of funds meant to compensate for the losses they have suffered on account of natural calamities.

While the verdict on their petitions is still awaited, the Supreme Court on April 1 rejected Kerala's plea for interim relief against the Union government seeking an increase of its borrowing limit to bail it out of immediate financial trouble.

How the states are handling the legal path, how the Centre responds to the charges, and what the Supreme Court decides in each case may set a precedent for decades to come.

Tamil Nadu: Cyclone relief

The Tamil Nadu government has moved the Supreme Court, alleging that funds due to it for natural disasters are withheld by the Centre. The MK Stalin-led DMK government invoked Article 131 of the Constitution for filing an original suit against the Centre in the top court.

The state government urged the top court to direct the Centre to provide over Rs 37,000 crore in aid for damages caused by recent floods and Cyclone Michaung.

Besides seeking financial assistance of Rs 19,692.69 crore for the damage caused by Cyclone Michaung in December last year, the Tamil Nadu government has sought funds to the tune of Rs 18,000 crore for losses incurred due to unprecedented rains in southern districts of the state.

The plea also seeks a direction to the Centre to release Rs 2,000 crore as interim measure.

Accusing the Centre of withholding relief funds, which the ruling BJP denies, Tamil Nadu claimed differential treatment in fund allocation. It also cited discrimination and violation of fundamental rights.

Karnataka: Drought relief

The Karnataka government also recently moved the top court, accusing the Centre of not providing financial assistance to address the drought situation. It sought directions that funds be released from the National Disaster Response Fund (NDRF).

Justifying the state government’s move, Chief Minister Siddaramaiah said they had no other option and they approached the apex court after waiting for five months to receive their claim under the NDRF. However, the BJP and the JD(S) lashed out at the Karnataka government for resorting to legal recourse for funds.

The petition to the Supreme Court seeks relief under Article 32 of the Constitution, which relates to constitutional remedy. It allows citizens to approach the Supreme Court if they believe their fundamental rights have been violated.

This is the second instance that a major disagreement has arisen between the Centre and the Congress government in Karnataka over fiscal reasons. Just the previous month, Siddaramaiah and his deputy DK Shivakumar staged a “Delhi Chalo” protest, alleging injustice to the state in the devolution of taxes and other allocations.

Kerala: Borrowing limits

Though the Supreme Court junked Kerala’s plea for interim relief, the court has referred the bigger issue of whether fiscal policy can be litigated upon to a larger five-judge bench.

The apex court expressed prima facie agreement with the Centre's stance that if borrowing limits were exceeded in the previous year, reductions in borrowing are permissible in the subsequent year.

“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 Union,” the apex court order noted.

The case pertained to Kerala’s suit against the Centre alleging that the latter was arbitrarily imposing a net borrowing ceiling, limiting the amount it could raise, leading to an urgent requirement of around Rs 26,000 crore to meet its financial obligations.

Funding sources

The Pinarayi Vijayan-led LDF regime in Kerala has accused the Union Finance Ministry of imposing a net borrowing ceiling in a manner that limits it from raising funds from all sources, including the open market.

Kerala had sought for an urgent interim order contending that if it's not granted immediate relief in the case, it would suffer irreparable damage. But the court rejected this contention, noting, “‘Monetary damage’ is not an irreparable loss, as the Court can always balance the equities in its final outcome by ensuring that pending claims are adjusted along with resultant additional liability on the opposite side.”

Noting that the Union government has already made a one-time offer to extend the borrowing limit by Rs 13, 608 crore, the SC observed that Kerala has secured substantial relief during the pendency of this interim application.

West Bengal: Repeated complaints

Apart from these southern states, the TMC government led by Mamata Banerjee in West Bengal too has time and again accused the Centre of denying funds to the state.

Media reports say that about Rs 18,000 crore is due for the state under three rural development schemes — Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), Pradhan Mantri Awaas Yojana (Gramin) (PMAY-G), Pradhan Mantri Gram Sadak Yojana (PMGSY). Apart from it, Rs 7,000 crore is also pending under schemes that come under the Union Food Ministry.

Alleging “irregularities”, the Centre has said it will release further payments to West Bengal only if the funds sanctioned earlier are fully utilised and a report is sent to it.

MGNREGA funds

The Centre had invoked Section 27 of the MGNREG Act, 2005, and stopped the release of funds to the state in March 2022. The Centre also stopped the release of funds to West Bengal under the PMAY-G scheme.

On the other hand, Mamata had dismissed allegations of misuse of central funds levelled against her regime by Prime Minister Narendra Modi. However, unlike southern states, the West Bengal government hasn’t taken the legal route for funds and instead commenced the payment of dues to approximately 30 lakh MGNREGA workers on its own last month. These dues amount to Rs 2,700 crore, pending since March 2022.