Southern states, especially Karnataka and Kerala, are gearing up to corner the federal government over “unfair treatment” they received in the process of tax devolution and grant disbursement.
Karnataka Chief Minister Siddaramaiah and his party MLAs and MPs will stage a protest at Delhi’s Jantar Mantar on Wednesday to “draw the attention of people across the country and the Union government”.
So what is the math behind tax devolution?
The Congress-led Karnataka government argued that in the 14th Finance Commission, the state received 4.71 per cent of the total tax revenue, which had dropped to 3.64 per cent in the 15th Finance Commission. The 1.07 per cent decline resulted in Karnataka’s share loss of Rs 45,000 crore in the past four years, the report said. If this year’s estimates are considered, the deficit over the five-year period would be Rs 62,098 crore.
The 15th Finance Commission in its interim report recommended a special allocation of Rs 5,495 crore to Karnataka. Besides, the final report also recommended an allocation of Rs 6,000 crore for the rejuvenation of ring roads and water bodies around Bengaluru. The total special allocation recommended by the 15th Finance Commission is Rs 11,495 crore.
The Karnataka government argued that the union finance ministry under Nirmala Sitharaman had refused to accept the suggestion. As a result, the state reportedly incurred a loss of Rs 73,593 crore due to reduced devolution of funds and special grants provided by the 15th Finance Commission that were not accepted by the federal government.
“In fiscal 2017-18, taxes and grants devolved to Karnataka constituted 2.2% of the budget, but this has been reduced to 1.23% in fiscal 2023-24. The overall budget expenditure has doubled, but the provision to us The funds have not increased, but decreased. Karnataka Chief Minister Siddaramaiah said that this year Karnataka is expected to receive donations of 4.3 billion rupees, but only 502.57 billion rupees have been returned.
Refusing to get involved in the North vs. South India debate, the chief minister said he had no problem with giving a little more support to the northern states. “We have nothing against the northern states of India. They can give a little more to the poorer states. They can give them more. But we cannot be treated unfairly. Rs 187,000 crore is what we got from the 14th Finance Commission to Losses of the 15th Finance Commission.”
The union finance minister dismissed the allegation that she stopped providing any funds to any state, calling it a politically corrupt claim. “Six months ago, if things were fine, what’s wrong now? Do you start spending money on items you shouldn’t? I’m not even questioning that, just spend it. But don’t take the blame Blame it on me. Don’t blame the Centre,” Nirmala Sitharaman said in Parliament.
In this regard, Siddaramaiah asked why the federal assembly members from the state did not safeguard the interests of Karnataka. “This has nothing to do with guarantees. When the mid-term report of the Finance Commission was submitted to the Finance Minister, there were no guarantees. Who rejected the Rs 11,000-crore special allocation recommended by the Finance Commission? She had promised Rs 530 crore for Upper Badra in the last budget Crores. Where is it?” Siddaramaiah asked.
Karnataka plans to advocate inclusion of taxes and surcharges in the devolution pool during the 16th Finance Commission deliberations. At this time, it has not been shared with states. The Union government is expected to collect Rs 550 crore in taxes and surcharges this financial year.
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