Kerala chief minister Pinarayi Vijayan on Thursday said the Centre’s “unconstitutional and illegal” measures in the “guise of controlling loans for development and welfare activities” have put the state in serious financial trouble and that the reason behind his government moving the Supreme Court was to restore the constitutional rights of the state.
Despite asking the Centre to stop its “discriminatory” measures, it has “intensified its vindictive moves to make the state’s survival impossible,” the chief minister alleged at a press conference in Kottayam on the sidelines of the Nava Kerala Sadas, an outreach programme of the LDF government as part of which it highlights the problems faced by the state due to the Centre’s alleged apathy.
Vijayan’s statement comes a day after the Kerala government moved the Supreme Court against the Centre’s cap on the borrowing limit in the form of an original suit filed under Article 131 of the Constitution.
“If the state is not able to borrow to the extent required based on the budget of the state, the state would not be able to complete its plans for the particular financial year…therefore it is essential for the progress, prosperity and development of the state and the people of the state that the state is able to exercise its constitutional rights and its borrowings are not impeded in any manner,” Kerala’s petition in the top court stated.
The CM explained that the state is seeking an order using the powers of the Supreme Court to settle Centre-State disputes under Article 131. “This legal battle is a historic one to maintain the country’s federal system. This petition is to restore the state governments’ constitutional rights,” he said.
“Kerala is one of the states that has radically reorganised the GST department under the new GST system. This resulted in significant growth in the state’s own revenue from the financial year 2020-21 onwards. However, factors such as the Centre’s failure to provide GST compensation and the reduction in revenue deficit grant by the Centre have squeezed the state financially. We have tried to overcome this by increasing tax and non-tax revenue and prioritising expenditure, but the economic impact is more than we can bear,” the CM said.
Union finance minister Nirmala Sitharaman said on Tuesday that there are no pending GST dues to any state. Some state governments have not submitted the authenticated certificate from the Accountant General (AG) required for the release of share of funds. “Kerala sent AG certificate but has asked to hold on till they reconcile with the AG certificate themselves. So, we are holding,” she said.
A finance ministry official aware of the issue said, “The central government is constitutionally mandated to set borrowing limits. During the Covid period, central government had relaxed the borrowing limits of states by two percentage of gross state domestic product (GSDP). A part of this relaxation was tied to citizen-centric reforms, which is in the larger interest of the nation. The borrowing limit prescribes a prudent fiscal path and it applies to all states without any discrimination. There is no merit in the arguments of Kerala government. The central government is not perturbed.”
Among Kerala’s demands are preventing “unconstitutional” interference by the Centre in the state’s financial affairs, repealing cuts to state borrowing limits and revoking the Centre’s order including the state’s public account liabilities in the borrowing limit.
“The Centre has no power to curtail the borrowing limit set by the state to meet the fiscal deficit, even on the recommendation of the Finance Commission. The cuts have been implemented by the Centre since 2017 by including amounts from the public account in the borrowing limit of the state. Later, loans taken by state-owned enterprises like KIFBI and KSSPL were also included in the borrowing limit of the state. Drastic cuts were implemented from 2022 onwards. The central government has no constitutional power to set state borrowing limits. Unconstitutional and illegal actions have been taken by exercising the powers which do not exist under Article 293(3) and 293(4) of the Constitution,” the CM told reporters.
The total loss in eligible loan collection to the state since 2016-17 has been ₹107,513.09 crore due to the Centre’s restrictions, Vijayan claimed, adding that in 2021-22, the loss was ₹6,281.04 crore.
Over a thousand development projects amounting to ₹82,000 crore planned to be implemented through KIIFB are in various stages and further central interventions will lead to the projects being abandoned, the CM said.
He said Kerala urgently needs ₹26,226 crore to ease the crisis caused by alleged central government’s actions. “It will not be enough to overcome the crisis. It is estimated that the loss due to central measures will be between ₹2-3 lakh crore in the next five years,” Vijayan said.
BJP spokesperson KVS Haridas said the Centre has been making fair decisions on financial matters of the states, including Kerala, based on the CAG report. “If Kerala is making out of the budget borrowings, it has to be seen as a liability of the state government…for each question raised by CPM MPs in Parliament on the financial dues of the state, clear answers have been provided by the union finance minister,” he said.
“In 2016, after the first Pinarayi Vijayan government was voted to power, a white paper was presented in the assembly by the government showing how funds from the Centre to the state have increased over the years. It was seen as criticism of the former Oommen Chandy-led government as to how it could not take the state forward financially despite increased cash flows from the Centre,” the BJP leader added.