Karnataka to seek increase in devolution funds under 16th Finance Commission
To recover losses from reduced devolution to Karnataka under the 15th Finance Commission, the Karnataka government has proposed to seek additional grants under the 16th Finance Commission during a meeting in Delhi on Friday.
Chief Minister Siddaramaiah, who also holds the Finance portfolio, and his economic adviser and MLA Basavaraj Rayaraddi, and senior officials would participate in the meeting and hold discussions with Arvind Panagariya, chairman, 16th Finance Commission.
The 16th Finance Commission has already held one round of talks with the Karnataka government.
Decreased devolution
Karnataka, which has been complaining about discrimination in the devolution of funds by the NDA government, is expected to demand the increase in the devolution from 3.64% to 5% in the 16th Finance Commission.
The 15th Finance Commission, in its award period (2020-21 to 2025-26), had dragged Karnataka's share (horizontal devolution) down from 4.71% in the 14th FC to 3.64%. Owing to this, according to sources in the State Secretariat, the State is likely to lose ₹62,098 crore during the 15th Finance Commission period.
Karnataka gets back only 0.29 paisa for one rupee it contributes to the Central pool of taxes, while Bihar gets back ₹7.06 and Uttar Pradesh gets back ₹2.73. This has been flagged by the government several times.
Cess and surcharges
Currently, the Centre does not share cess and surcharges collected from States. Karnataka has been requesting the Centre to bring cess and surcharges colleges from States under the divisible pool. The Centre has been collecting about ₹5 lakh crore annually in the form of taxes from the State, but receiving about ₹55,000 crore, including grants from the Centre.
The Finance Commission's award period would commence from April 1, 2026.
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