Karnataka demands its fund devolution share raised to 50%
Bengaluru: Chief minister Siddaramaiah on Friday presented before the 16th Finance Commission the demand of Karnataka to increase the state's share in the devolution of funds to 50% and increase the share of taxes collected to 60% for states.
In his additional memorandum, Siddaramaiah also demanded Rs 1.1 lakh crore for strengthening Bengaluru's infrastructure.
Speaking to the media after his hour-long meeting with the chairman and members of the commission, Siddaramaiah said the govt placed before the commission its primary demand of having a rational division in tax devolution and tax sharing.
"Karnataka contributes, as of the 2024-25 fiscal, as much as Rs 4.5 lakh crore annually.
But what comes back to the state is 15 paise on every 1 rupee of tax collected. This is unfair. We have urged the commission to have a rational approach in tax devolution and tax sharing," the CM said.
Siddaramaiah said Karnataka lost Rs 68,275 crore between the 14th and 15th Finance Commission allocations which went down from 4.7% to 3.6% in the last five years. The state also lost another Rs 8,084 crore via cess and surcharge.
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"As a result, we have asked the commission to increase the state's share in devolution and also in tax collection, apart from including non-tax revenue in the devolution share," he said.
Karnataka demanded that the cess and surcharges - which are not shared with states – be capped at 5% of the taxes. "And if it crosses 5%, then the union govt must share it with the states," he said.
In Karnataka's memorandum, Siddaramaiah asked for a change in the formula of the income-distance criterion by 20% and to reallocate the same towards a state's economic contribution, so that high-performing states are not penalised but encouraged.
The CM also asked the commission to reconsider the flawed design of revenue deficit grants and the unpredictable nature of state-specific grants.
"While Kerala was provided Rs 38,000 crore over the last five years to cover its revenue deficit budget, Karnataka, despite having a deficit revenue budget over the last two years, has not been given a single rupee," he claimed.
Meanwhile, reiterating the demand for grants for Bengaluru and other critical projects under discretionary special grants, Siddaramaiah has sought Rs 1.1 lakh crore investment to strengthen the city's infrastructure. He has said the city plays a major role in Karnataka's economy. Siddaramaiah also urged the commission to consider the need for additional funds for the state, specifically for Malnad, Kalyana Karnataka, and coastal Karnataka, which face natural disasters every year.
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