CM Siddaramaiah: Centre failed to compensate Karnataka for GST revenue loss

BENGALURU: While stressing that Karnataka is noted for its prudent fiscal policy, debt management and adherence to fiscal discipline, Chief Minister Siddaramaiah said 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 ompounded the state’s fiscal challenges. “As a result, Karnataka has been facing revenue challenges in its pursuit of long-term growth with social justice”, he said.

“The central transfers to the state have suffered a severe decline after the implementation of the 15th Finance Commission devolution formula. Karnataka has had the sharpest decline in its share of tax devolution in the divisible pool as was reduced to 3.647% in 15th FC period compared to 4.713% in 14th FC. This is a decline of 23 per cent in devolution translating into an estimated loss in revenue of Rs 12,000 crore per year”, he said.

“The 15th Finance Commission had recommended a special grant of Rs 5,495 crore to the state 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. Further, in the Union Budget for the year 2023-24, Rs 5,300 crore was announced for the Upper Bhadra Irrigation Project. However, the central government has not released any grant so far”, he said.

“The state has made a strong argument before the 16th finance commission for an increase in share in tax devolution. We have proposed that share between centre and State should be at least 50% of the divisible pool. This will ensure a fair allocation of resources between the centre and the state. Despite this challenge, the State 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 mobilization”, he said.

“State revenue collections are expected to register a year-on-year growth of 10.3% in 2024-25. Non-tax revenue collection has out-performed the annual targets for the year 2024-25 and is expected to reach Rs 14,500 crore, registering a growth of 10.5% over previous year. However, non-tax revenue, as a percentage of GSDP and as percentage of the own tax revenues, have stagnated over the last few years”.

“There remains significant potential to increase non-tax revenue and in order to fully tap this potential, the State Government has constituted a Resource Mobilization Committee. The Resource Mobilization Committee has submitted an interim report and as per the recommendations of the committee, the Government will take necessary steps for resource mobilization in due course”, he said.

The CM said, “We have allocated a budget of Rs 51,034 crore for Guarantees in the current financial year. It should be noted that we managed the guarantees within the prudent fiscal deficit norm of 3% of GSDP and debt–GSDP ratio of 25% for the last two budgets. A new scheme called the Chief Minister’s Infrastructure Development Programme (CMIDP) is being launched with Rs 8,000 crore investment to ensure balanced development across the state, focusing on minor irrigation, roads and urban infrastructure in all legislative assembly constituencies of the
state”.

“The government is committed to increasing transparency and combating corruption in administration. We will introduce the system of transfers and postings through counselling in all Group-B and Group-C posts in various revenue collecting departments, namely, Commercial Tax, Excise, Stamps & Registration, Transport and Mines & Geology”.

“The budget has made sufficient allocation for all the guarantee schemes. Going beyond the guarantees, we have made a substantially higher allocation for capital expenditure in the budget. We have managed to do this even while keeping the fiscal deficit and total liabilities ratio within prudent fiscal norms and limits mandated by the Karnataka Fiscal Responsibility Act. This accomplishment is a matter of immense pride for the state”, he said.

“In the previous budget, I had focused on strengthening the state’s economy by maintaining fiscal discipline, allocating adequate funds for public welfare and development projects. I remain committed to the same objective in the 2025-26 budget, striving to further accelerate the state’s growth and prosperity”, Siddaramaiah said.