The Kerala government has today strongly opposed the central government's assumption that the state might default on its debt if allowed to borrow more than 3.5 per cent of its Gross State Domestic Product (GSDP). This criticism came during a hearing in the Supreme Court regarding Kerala's petition seeking relaxation of its borrowing limits.
Kapil Sibal, representing the Kerala government, questioned the basis of the central government's assertion, asking, "Are we so irresponsible that we will not be able to pay our debt? On what basis is the central government saying this?"
Petition for Relaxation
The Kerala government has petitioned the court seeking relaxation of its borrowing limits, citing financial constraints. It urged for an interim order to raise the borrowing limit for the current fiscal year ending in March.
Court Proceedings
The apex court, led by a bench comprising Justice Surya Kant and Justice K.V. Viswanathan, has been hearing the state's plea. The court announced that it would conclude hearings on an interim order regarding Kerala's borrowing limits by Friday. However, efforts to resolve the matter outside the courtroom had previously failed.
Centre's Argument
The Centre, represented by Additional Solicitor General N. Venkataraman, argued against granting Kerala's request. Venkataraman pointed out Kerala's financial track record, stating that Kerala had been among the states granted extra borrowing allowances in previous fiscal years.
In the last hearing on March 13, the Centre had proposed an additional borrowing allowance of Rs 50 billion for Kerala in the current financial year. However, the state rejected the offer, deeming it inadequate and burdened with unfavorable conditions. However, the state rejected the offer, citing inadequacy and burdened with unfavorable conditions.
Background on Borrowing Limits
Last year, the Centre had reduced states' borrowing limits to 3.5 per cent of GSDP from 4 per cent, with an additional 0.5 per cent tied to power sector reforms, despite Kerala's request to increase its limit to 4.5 per cent of GSDP. Kerala had sought an increase in its borrowing limit to 4.5 per cent of GSDP but was denied.
