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Hindustan Times
a day ago
- Business
- Hindustan Times
‘For every ₹1 we give, Karnataka gets only ₹0.15 back': Siddaramaiah seeks ₹1.15 lakh crore for Bengaluru
Karnataka Chief Minister Siddaramaiah on Friday made a strong pitch before the 16th Finance Commission for a more equitable share of central taxes for the state and sought a ₹1.15 lakh crore investment over five years to bolster Bengaluru's infrastructure. In a detailed meeting with Commission Chairman Arvind Panagariya, the chief minister flagged the fiscal disparity Karnataka faces, stating that despite contributing nearly 8.7% to India's GDP with only 5% of the population, the state receives disproportionately low returns from the Centre. Also Read - Bengaluru climbs to 14th spot in Global Startup Ecosystem Rankings 2025 'For every rupee Karnataka contributes to union taxes, we receive just 15 paise in return,' Siddaramaiah said, calling the imbalance stark and deeply unjust. He added that the discussion with Panagariya was cordial, and the Commission appeared open to the state's demands. The chief minister also drew attention to the state's reduced share in central funds under the 15th Finance Commission. Karnataka's share in tax devolution dropped from 4.71% to 3.64%, leading to an estimated loss of over ₹80,000 crore during the award period. Moreover, Karnataka's per capita devolution fell from 95% to just 73% of the national average between the 14th and 15th Finance Commissions. In its formal submission, the state government called for a significant overhaul in the devolution formula. Karnataka urged the Commission to raise states' share of divisible taxes to at least 50%, cap cess and surcharges at 5%, and include the Centre's non-tax revenues in the divisible pool. Siddaramaiah stressed that states are currently excluded from revenue earned through central cess and surcharges. 'If cess and surcharges exceed 5%, they should be brought into the divisible pool so that states can benefit,' he said. Also Read - Bengaluru woman witnesses rare 'peaceful accident': 'No fights, just handshakes' To ensure a fairer distribution among states, Karnataka proposed a model in which each state retains about 60% of its contribution to central taxes, while the remaining 40% supports less-developed regions — striking a balance between equity and incentivising performance. The chief minister also criticised the current design of revenue deficit and state-specific grants. He cited Kerala's receipt of a ₹38,000 crore revenue deficit grant, while Karnataka received nothing under that head. He also questioned the denial of a ₹5,495 crore special grant recommended for Karnataka by the 15th Finance Commission but ultimately not sanctioned by the Union government. To correct these imbalances, the state has suggested recalibrating the weight of the income-distance criterion — currently favouring poorer states — by reducing it by 20%, and reallocating that weight to reflect each state's contribution to the national GDP. This, Siddaramaiah argued, would ensure that economically productive states like Karnataka are rewarded rather than penalised. He concluded by urging the Finance Commission to consider reforms that would make the devolution system more predictable, performance-based, and transparent — with a focus on both promoting national growth and addressing regional disparities.
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Business Standard
2 days ago
- Business
- Business Standard
Karnataka seeks bigger share of central taxes, Rs 1.15 trn for B'luru infra
Karnataka Chief Minister Siddaramaiah on Friday met 16th Finance Commission Chairman Arvind Panagariya, demanding a larger allocation for the state from the central tax pool and Rs 1.15 lakh crore investment to strengthen Bengaluru's infrastructure for the five-year period beginning April 1, 2026. In the meeting, which lasted for more than an hour, Siddaramaiah flagged that there has been a "stark imbalance in fiscal returns" despite Karnataka contributing nearly 8.7 per cent of the national GDP with just 5 per cent of the population and ranking second in the country in GST collections. "The imbalance in fiscal returns is so much that for every rupee Karnataka contributes to union taxes, it receives only 15 paise in return," the CM told reporters after the meeting. Speaking about the discussion, Siddaramaiah said: "The meeting was very cordial and the chairman was very receptive to our demands... We have told them that the tax devolution to states should be done fairly and rationally." The CM pointed out that the reduction in Karnataka's share under the 15th Finance Commission -- from 4.71 per cent to 3.64 per cent -- resulted in a cumulative loss of over Rs 80,000 crore during the award period. Karnataka's per capita devolution has also dropped significantly from 95 per cent to 73 per cent of the national average between 14th and 15th Finance Commissions, despite increased GDP contribution. Siddaramaiah called for "critical reforms" to make the fiscal devolution system more growth-oriented, predictable and fair, while highlighting three main concerns: the growing disparities in per capita devolution; the flawed design of revenue deficit grants; and the unpredictable nature of state-specific grants. In the memorandum submitted to the Commission, Karnataka demanded that the share of taxes devolved to states be increased to at least 50 per cent, and that cess and surcharges be capped at 5 per cent. The state also recommended including union non-tax revenues in the divisible pool. "The Centre collects cess and surcharge on various commodities. We don't have a share in it. If they collect more than 5 per cent it should come under the divisible pool," Siddaramaiah said. For sharing funds among states, the chief minister suggested that each state retain about 60 per cent of what it contributes, with 40 per cent going to less-developed states ensuring both growth and equity. To make the formula fairer, Karnataka has proposed reducing the weight of the income-distance criterion by 20 per cent and reallocating the same to reflect state's fiscal contribution as measured by the share in national GDP, so that high-performing states are not penalised but encouraged. Siddaramaiah also questioned the effectiveness of revenue deficit grants. "About Rs 38,000 crore revenue deficit grant was given to Kerala, but not to Karnataka. Similarly, a special grant of Rs 5,495 crore was recommended for Karnataka by 15th Finance Commission but Government of India refused to give it to us," he said. As a result, the state government has recommended replacing "discretionary" special grants with a formula-based allocation of 0.3 per cent of Gross Union Receipts. However, the state has requested grants for Bengaluru development and other critical projects if the Commission continues with such provisions. "Karnataka's fiscal strength fuels national growth. It is time to ensure that growth is not penalised but rewarded. We urge the commission to adopt a balanced, forward-looking approach to devolution," Siddaramaiah said. The overall share allocated to all states from central taxes was reduced to 41 per cent for 2021-26, as against 42 per cent in the previous cycle, primarily due to the creation of Union Territories of Jammu and Kashmir and Ladakh. Siddarmaiah was accompanied by Economic Advisor to CM Basavaraya Reddy, Chief Secretary Shalini Rajneesh, Principal Secretary of Finance Ritesh Singh, and other state officials. The 16th Finance Commission, established in December 2023, is tasked with recommending tax revenue distribution between the central government and states for 2026-31. The commission must submit its recommendations by October 31, 2025.
The Hindu
2 days ago
- Business
- The Hindu
Karnataka seeks hike in devolution of funds from Centre to 50%, more weight to a State's economic performance
To overcome a stark imbalance in the devolution of funds to Karnataka from the Centre, Chief Minister Siddaramaiah on Friday demanded that the share of taxes devolved to States (vertical devolution) be increased to at least 50%, and cess and surcharges be capped at 5% in the 16th Finance Commission (FC). He also sought support for ₹1.15 lakh crore investment to strengthen Bengaluru's infrastructure, given its major role in Karnataka's economy. Bridging regional gaps During a meeting with the 16th FC Chairman Arvind Panagariya and panel members in New Delhi, the Chief Minister highlighted the need to bridge regional gaps in Kalyana Karnataka and Malnad, which earn low incomes and have poor infrastructure. The State 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. 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. In its memorandum to the FC, Karnataka has called for critical reforms to make the fiscal devolution system more growth-oriented, predictable, and fair. Three key issues The State has highlighted three key issues such as the growing disparities in per-capita devolution, the flawed design of revenue deficit grants, and the unpredictable nature of State-specific grants. The Chief Minister said that for every rupee Karnataka contributes to the Union taxes, it receives only 15 paise in return. The reduction in Karnataka's share under the 15th FC from 4.713% to 3.647% has resulted in a cumulative loss of over ₹80,000 crore during the award period. Karnataka played a pivotal role in India's economic growth, contributing nearly 8.7% of the national GDP with just 5% of the population. It ranked second in GST collections, he said. Big drop in devolution Mr. Siddaramaiah said Karnataka's per capita devolution has dropped significantly, from 95% to 73% of the national average between the 14th and 15th Finance Commissions, despite increased GDP contribution. While noting that equity remained a key principle, he said it must be implemented in a time-bound and outcome-oriented manner, without disadvantaging States that demonstrate strong economic performance and sound fiscal management. He said that the income-distance weightage should be reduced by 20% and the same should be reallocated to reflect the States' fiscal contribution, as measured by their share in the national GDP. Mr. Siddaramaiah recommended replacing discretionary special grants with a formula-based allocation of 0.3% of gross Union receipts. However, he reiterated the request for grants for Bengaluru and other critical projects if the commission continues with such provisions. The Chief Minister emphasised that growth and equity must coexist, and that a strong Karnataka supported by fair fiscal devolution was essential for a strong India. 'Karnataka's fiscal strength fuels national growth. It is time to ensure that growth is not penalised but rewarded. We urge the commission to adopt a balanced, forward-looking approach to devolution,' the Chief Minister said. The FC's award period commences on April 1, 2026.
Time of India
2 days ago
- Business
- Time of India
Siddaramaiah seeks increase in Karnataka's share of taxes to 50%, Rs 1.15 lakh cr for Bengaluru infrastructure
Chief Minister Siddaramaiah on Friday pressed the 16th Finance Commission to increase the state's share of central taxes to 50% and cap the cesses and surcharges at 5%. The CM, in a meeting with Commission chairman Arvind Panagariya in Delhi, urged him to include the union government's non-tax revenues also in the divisible pool. Karnataka, Siddaramaiah said in a memorandum, contributed 8.7% to the national GDP though it accounted for just 5% of the country's population. The state also ranks second in GST collections. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like War Thunder - Register now for free and play against over 75 Million real Players War Thunder Play Now Despite this contribution, there is a stark imbalance in fiscal returns: for every rupee Karnataka contributes to Union taxes, it receives only 15 paise in return. The reduction in Karnataka's share under the 15th Finance Commission — from 4.713% to 3.647% — resulted in a cumulative loss of over ?80,000 crore during the award period, he said. Siddaramaiah proposed that each state must be allowed to retain about 60% of what it contributes, and the rest could go to less-developed states. This, he said, would ensure both growth and equity. Karnataka proposed reducing the weight of the income-distance criterion by 20% and giving more weight to a state's economic contribution, so that high-performing states are not penalized, but encouraged. Live Events The state's per capita devolution has dropped significantly — from 95% to 73% of the national average between the 14th and 15th Finance Commissions, despite an increased GDP contribution, the CM highlighted, while questioning the effectiveness of revenue deficit grants. Siddaramaiah sought a support of ?1.15 lakh crore for investment to strengthen Bengaluru 's infrastructure, given its major role in Karnataka's economy. He also stressed the need to bridge regional gaps in Kalyana Karnataka and Malnad, which face low incomes and poor infrastructure. The state government also favoured replacing discretionary special grants with a formula-based allocation of 0.3% of gross union receipts. If the Commission were to continue with such provisions, then it must give grants for Bengaluru and state's other critical projects, Siddaramaiah said.
