Karnataka Chief Minister Siddaramaiah on Monday urged Union Finance Minister Nirmala Sitharaman to release special grants and State-specific grants recommended by the 15th Finance Commission.
In a letter to Finance Minister, Siddaramaiah said, "The 15th Finance Commission has reduced Karnataka’s share in tax devolution to 3.647 per cent of the divisible pool for the term 2020-21 to 2025-26 from 4.71 per cent recommended by the 14th Finance Commission."
The Chief Minister also opposed the steepest cut of 23 per cent in devolution of funds to the state Rs 37,011 crore in the past four years, from 202-21 to 2023-24. “The decrease in tax devolution share to Karnataka by the 15th Finance Commission when compared with the 14th Finance Commission recommendation, has decreased the total tax devolution to the State by Rs 37,011 crore in the past four years, from 202-21 to 2023-24,” Siddaramaiah said in his letter.
Income-distance criteria adopted by commission
The Chief Minister said that Karnataka has lost out heavily on the Income-Distance criteria adopted by the commission. "The introduction of new methodology for compilation of Gross State Domestic Product (GSDP) has dramatically raised State’s GSDP in 2011-12 series by over 30 per cent as against an average increase of less than 9 per cent for all States put together.
“The increase in GSDP at the absolute level was similarly reflected in a step up in per capita income affecting the standing of the State. If affected the share of State in Income-Distance parameter from 4.2 per cent as per the 14th Finance Commission to 1.1 per cent. This alone dragged the devolution share of the State from 4.71 per cent awarded by the 14th Finance Commission to 3.64 per cent awarded by the 15th Finance Commission," he said.
Siddaramaiah noted that the contribution of IT-related services had substantially boosted the state's GSDP in the 2011-12 series. "Even though the IT-related services contribution has increased the GSDP of the State significantly in the 2011-12 series, there was no corresponding contribution of these services to the State taxes as exports of IT services are zero-rated," he said.
What was recommended
He said that the 15th Finance Commission in its report for 2020-21 has recommended Rs 5,495 crore to Karnataka as Special Grants for 2020-21. But the Centre has not considered the Commission’s recommendation.
Siddaramaiah in his letter said that the 15th Finance Commission, in its final report for 2021-26, had awarded state-specific grants of Rs 6,000 crore to Karnataka for the holistic improvement of water bodies in Bengaluru and for the peripheral ring road.
"However, the Government of India, in its explanatory memorandum has said that ‘keeping in view the united resources with the State governments and the fiscal commitments of the Central Government, due consideration will be given to the recommendation on Special Grants,” the letter read.
Siddaramaiah said however, no grants have been released so far to the State of Karnataka and this has been a major setback to the State's Fiscal Position which is already strained due to a severe cut in tax devolution. “Considering the serious fiscal constraints of the State on account of decreased devolution, I request you to kindly accept the recommendation of the Commission on Special Grants and State Specific Grants and release it to the State on utmost priority,” he added.
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