Siddaramaiah flags ‘stark imbalance in returns', seeks higher central tax pool share

Indian Express

14 hours ago

Karnataka Chief Minister Siddaramaiah on Friday met the 16th Finance Commission in Delhi and is learnt to have 'highlighted a stark imbalance in fiscal returns', telling the Commission that 'for every rupee Karnataka contributes to Union taxes, it receives only 15 paise in return'.
A statement issued after the meeting by the CM's office said that Siddaramaiah 'pointed out that the reduction in Karnataka's share under the 15th Finance Commission from 4.713% to 3.647% resulted in a cumulative loss of over Rs 80,000 crore during the award period'.
The overall share allocated to all states from central taxes was reduced to 41% for 2021-26, as against 42% in the previous cycle, primarily due to the creation of Union Territories of Jammu and Kashmir and Ladakh. Siddaramaiah demanded a larger allocation for the state from the central tax pool for the five-year period beginning April 1, 2026.
According to the statement, Karnataka 'proposed that the share of taxes devolved to states (vertical devolution) be increased to at least 50% (from April 1, 2026), and that cesses and surcharges be capped at 5%'. 'The state also recommended including Union non-tax revenues in the divisible pool.'
'For sharing funds among states (horizontal devolution), Karnataka suggested that each state retain about 60% of what it contributes, with 40% going to less-developed states, ensuring both growth and equity,' it said.
Siddaramaiah told the Commission that 'to make the formula fairer, Karnataka has proposed reducing the weight of the income-distance criterion and giving more weight to a state's economic contribution, so that high-performing states are not penalised, but encouraged,' said the statement.
The state also called for 'critical reforms' to make the fiscal devolution system 'more growth-oriented, predictable, and fair' and highlighted three 'key issues' — the growing disparities in per capita devolution; the flawed design of revenue deficit grants, and the unpredictable nature of state-specific grants.
During the meeting, the CM told the Commission that the state recommends replacing discretionary special grants with a formula-based allocation of 0.3% of Gross Union Receipts.
The CM also sought support for Rs 1.15 lakh crore investment to strengthen Bengaluru's infrastructure, given its major role in Karnataka's economy, said the statement.