Bengaluru: While presenting the budget for the financial year 2025-26, Chief Minister Siddaramaiah targeted the Centre over the poor allocations of funds and GST revenue loss to Karnataka.
CM Siddaramaiah maintained that despite this challenge, Karnataka is able to execute its vision with robust growth in the state’s own revenue receipts.
CM Siddaramaiah stated on Friday, “Karnataka is noted for its prudent fiscal policy, debt management and adherence to fiscal discipline. It introduced the FRBM Act before the Government of India. It is also the first state in the country to incorporate off-budget borrowings into total liabilities.”
“However, the Union government’s failure to fully compensate for GST revenue loss, non-devolution of cesses and surcharges and lower tax devolution from the 15th Finance Commission compounded the state’s fiscal challenges. As a result, Karnataka has been facing revenue challenges in its pursuit of long-term growth with social justice,” CM Siddaramaiah pointed out.
Central transfers to Karnataka have suffered a severe decline after the implementation of the 15th Finance Commission devolution formula.
Karnataka has had the sharpest decline in the share awarded by the 15th Finance Commission.
“Karnataka’s share of tax devolution in the divisible pool was reduced to 3.647 per cent in the 15th Finance Commission period compared to 4.713 per cent in the 14th Finance Commission,” CM Siddaramaiah stated on Friday.
This is a decline of 23 per cent in devolution translating into an estimated loss in revenue of Rs 12,000 crore per year.
The 15th Finance Commission had recommended a special grant of Rs 5,495 crore to Karnataka for reduction in the state’s share in devolution, along with a special grant of Rs 3,000 crore for lake development in Bengaluru and Rs 3,000 crore for the development of the Peripheral Ring Road, totalling to Rs 11,495 crore in its report.
“But the Central Government has not released any of these grants to the state,” CM Siddaramaiah pointed out.
“Further, in the Union Budget for the year 2023-24, Rs 5,300 crore was announced for the Upper Bhadra Irrigation Project, however, the Centre has not released any grant so far,” CM Siddaramaiah highlighted.
Karnataka has made a strong argument before the 16th Finance Commission for an increase in share in tax devolution.
Karnataka has impressed upon the commission to strike a judicious balance between the twin considerations of equity and growth from the viewpoint of evolving a harmonious and healthy fiscal federalism, he stated.
“While economically advanced states are committed to supporting poorer states, it should not be at the expense of their own residents or economic efficiency. In addition, there are conceptual and methodological shortcomings with the income distance/per-capita GSDP variable and we have very strongly advocated lesser weightage for this factor,” CM Siddaramaiah said.
“We have proposed that the share between the Centre and state should be at least 50 per cent of the divisible pool. This will ensure a fair allocation of resources between the Centre and the State.
“The cesses and surcharges imposed by the Government of India should be capped at 5 per cent of gross tax revenue and anything exceeding that should be a part of the divisible pool.
“In the Horizontal Pool the state should receive about 60 per cent of its contribution to the divisible pool, which is reserved for inter se allocation among the states, thereby capping the share of resource transfer to recipient states at 40 per cent,” CM Siddaramaiah stated.
“Despite this challenge, Karnataka is able to execute its vision because of the robust growth in the state’s own revenue receipts and persistent efforts by the state Government towards revenue mobilisation. State revenue collections are expected to register a year-on-year growth of 10.3 per cent in 2024-25,” CM Siddaramaiah underlined.
(IANS)
