Kollam (Kerala) | The Kerala government has flayed the Centre's stand to allow the state to borrow money only if it withdrew the case before the Supreme Court, terming it "highly disappointing" and detrimental to fiscal federalism.

Addressing media here on Monday, state Finance Minister K N Balagopal claimed that the central government has informed the apex court that if Kerala withdraws its petition, the government will give the state permission to borrow around Rs 12,000 crore on Monday itself.

"The state government has filed the case in the Supreme Court for the fund which is rightfully ours," he said.

"The Union government's stand is highly disappointing and will affect the fiscal federalism of the state and the day-to-day activities of the state government," Balagopal added.

"Our lawyer Kapil Sibal argued for us and said we were seeking the amount that is rightfully ours. We have filed the petition seeking the fund as per our constitutional rights. They have asked us to withdraw our plea and it amounts to injustice," the minister added.

On February 15, a meeting was convened in the national capital following the Supreme Court's suggestion during a hearing of the petition filed by the Kerala government accusing the Centre of interfering in the exercise of its "exclusive, autonomous and plenary powers" to regulate the state's finances by imposing a ceiling on net borrowing.

The top court on Monday asked the Kerala government to "mentally prepare itself" as the court may not be able to give an interim order in its favour on a plea alleging the Centre's interference in the state's finances by imposing a ceiling on net borrowing.

"This is pure financial thicket. How much can a court interfere, that too by an interim order," the bench said, adding, "Mentally prepare yourself (Kerala) that we may not be able to give an interim order. We are not experts on the subject matter." Sibal said that Kerala's claim is over Rs 24,000 crore and its entitlement is Rs 11,000 crore but they (the Centre) want the state government to first withdraw the suit for consideration of entitlement.

"For borrowing, they are telling us to first withdraw the suit and then they will consider. Are we going to be penalised for filing a suit for our financial rights?" Sibal asked.

The court has now directed the matter to be listed on March 6 and asked both the Kerala and the Union governments to keep the channel of negotiation open to resolve the dispute.