Siddaramaiah pushes for growth-oriented tax share model in meeting with Sitharaman

Time of India

7 hours ago

Bengaluru/New Delhi: Chief minister
Tuesday urged the Union govt to adopt a more development-focused tax devolution formula under the 16th Finance Commission, pointing out that Karnataka had suffered a massive revenue shortfall of Rs 80,000 crore under the previous award.
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During a meeting with Union finance minister
, Siddaramaiah called for a "pro-growth approach" in allocation of central taxes among states and highlighted the adverse impact of the current formula on Karnataka's finances.
He pointed out that Karnataka's share in central taxes declined from 4.7 % under the 14th Finance Commission to 3.6% under the 15th Finance Commission, amounting to a 23% reduction in real terms.
A release from the CMO said: "The state was also not allocated Rs.11,495 crore special grants. As a result, the state lost a total of Rs.80,000 crore during the award period."
Siddaramaiah attributed this decline to the 15th commission's over-reliance on the income-distance criterion, which received 45% weightage. He proposed a realignment of this formula.
"The state has requested that the weightage for income-distance should be reduced by 20 percentage points under the 16th Finance Commission and reallocated to fiscal contribution — which is the state's share in national GDP," Siddaramaiah said.
He also urged Sitharaman to discontinue revenue deficit grants in its current form. "They are against the principles of fiscal discipline as proposed in the Fiscal Responsibility and Budget Management (FRBM) framework," Siddaramaiah said. "We proposed that the same amount — which was 1.9% of gross Union receipts under the 15th Finance Commission — should be redistributed among all states using the horizontal devolution formula.
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"
The CM raised region-specific concerns as well, highlighting developmental challenges of Bengaluru, Kalyana Karnataka and Malnad regions. "A fair and pro-growth devolution will accelerate the state's growth," Siddaramaiah told Sitharaman in the 30-minute meeting.
Rejecting suggestions that Karnataka is demanding special treatment, Siddaramaiah said the proposals are aimed at strengthening the federal fabric.
"On the contrary," he said, "It will improve overall national resource mobilisation and foster cooperative and competitive federalism."
Siddaramaiah urged the Centre to incorporate these suggestions in the memorandum of the 16th Finance Commission. "A growth friendly devolution will ensure that all states are empowered to contribute their best to India's development journey," he said.
Earlier on Tuesday, Siddaramaiah met President Droupadi Murmu at Rashtrapati Bhavan to seek assent for seven key bills passed by the state legislature.
These bills span education, mineral taxation, procurement reform, and administrative streamlining, and require presidential approval under constitutional provisions. Major bills include the Right of Children to Free and Compulsory Education (Karnataka Amendment) Bill, 2025, and the Karnataka (Mineral Rights and Mineral Bearing Land) Tax Bill, 2024.
Others focus on procurement transparency, registration processes, notary reforms, and regulation of religious institutions. These bills touch subjects in the Concurrent List or intersect with central laws, mandating Union govt clearance before implementation.