karnataka-cm-demands-fair-share-from-16th-finance-commission

Karnataka Chief Minister Siddaramaiah urged the 16th Finance Commission on Thursday to consider capping cesses and surcharges at 5 per cent of gross tax revenue, with any excess allocated to the divisible pool.

Addressing the Commission’s Chairman, Arvind Panagariya, and its members, CM Siddaramaiah also called for a recommendation to ensure vertical devolution of at least 50 per cent from the divisible pool.

CM Siddaramaiah proposed that all non-tax revenues of the Centre be included in the divisible pool through a constitutional amendment.

He argued that while economically advanced states are willing to support poorer regions, it should not come at the cost of their own residents or economic efficiency.

He expressed concern that the emphasis on equity by the 15th Finance Commission had penalised Karnataka and similar states for their fiscal and demographic performance.

CM Siddaramaiah noted that cesses and surcharges, which are not part of the divisible pool, have grown over the years, leading to a significant loss for states. Karnataka, he said, has lost Rs 53,359 crore from 2017-18 to 2024-25 due to this issue.

Highlighting Karnataka's substantial contributions to national revenue, Siddaramaiah pointed out that the state contributes approximately 8.4 per cent to the national GDP with only about 5 per cent of the population. Despite this, Karnataka receives only 15 paise back for every rupee it contributes.

Siddaramaiah called for greater devolution to address regional imbalances, particularly in the Kalyana Karnataka region, and the challenges of urbanisation in Bengaluru.

He requested a grant of Rs 27,793 crore for Bengaluru's development, Rs 25,000 crore for Kalyana Karnataka, and Rs 10,000 crore for disaster mitigation in the Western Ghats.

He also criticised the 15th Finance Commission for reducing Karnataka’s share from 4.713 per cent to 3.647 per cent, resulting in a loss of Rs 68,275 crore from 2021-26.

Although the Commission recommended state-specific grants of Rs 11,495 crore, these were not accepted by the Government of India, leaving Karnataka with a total loss of Rs 79,770 crore during the period.

Siddaramaiah revealed that Karnataka has experienced revenue transfers of Rs 35,000-40,000 crore annually to other states, amounting to 1.8 per cent of its GSDP, with net transfers representing 50-55 per cent of the total revenue it generates.