Karnataka Chief Minister Siddaramaiah on Thursday called for a fair distribution of resources from the 16th Finance Commission, highlighting severe limitations imposed by reduced Central financial transfers. Addressing the Commission in Vientiane, Laos, Siddaramaiah emphasized the need for a balanced approach to resource sharing.
He stated, “Seven crore Kannadigas look up to the Finance Commission to advocate for a balanced and fair approach to sharing of resources as reduction in Central financial transfers places severe limitations on the state’s ability to invest in physical and human infrastructure.”
Siddaramaiah stressed that a strong Karnataka is vital for a strong India. He noted, “States with strong contributions to the country’s GDP and Gross Tax Revenue help build the nation in more ways than one. Seven crore Kannadigas, while being proud of their contributions to the country, have aspirations. They look up to the Commission to advocate a balanced and fair approach to sharing of resources.”
He criticized the disproportionate weightage given to equity, which he believes penalizes Karnataka and similar states for their good performance. “Due to the disproportionate weightage given to equity, Karnataka and similarly placed states end up getting penalized for their good performance, both fiscally and demographically. However, the reduction in Central financial transfers is placing severe limitations on the ability of the states to invest in physical and human infrastructure. This issue must be addressed urgently,” Siddaramaiah added.
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The Chief Minister also highlighted regional imbalances, particularly in the Kalyana Karnataka region. He requested significant financial support. The demand included a grant of Rs 27,793 Cr for Bengaluru and a matching grant of Rs 25,000 crore for Kalyana Karnataka. Siddaramaiah also sought Rs 10,000 crore for disaster mitigation in the Western Ghats.
He criticized the 15th Finance Commission’s award, which reduced Karnataka’s share from 4.713% to 3.647%. This reduction has led to a loss of Rs 68,275 crore from 2021-26. Although the Commission recommended state-specific grants of Rs 11,495 crore. However, the Government of India did not accept this recommendation, resulting in a total loss of Rs 79,770 crore.
CM highlighted that reliance on cesses and surcharges by the Union has reduced the share of funds for states. He noted a loss of Rs 53,359 crore from 2017-18 to 2024-25 due to non-sharing of these funds. Despite these challenges, Karnataka has maintained high capital expenditure, ranking first in this regard.
The Chief Minister demanded the allocation of the resources generated by states back to them. He recommended that vertical devolution should be at least 50% of the divisible pool. CM further proposed capping cesses and surcharges at 5% of gross tax revenue. Additionally, he suggested including all non-tax revenues of the Centre in the divisible pool through a constitutional amendment.
Siddaramaiah concluded by urging the Commission to balance equity considerations with rewards for efficiency and performance. He proposed that 60% of a state’s contribution to the divisible pool should get back to that state.
The 16th Finance Commission, led by Chairman Dr. Arvind Panagariya and members Ajay Narayan Jha, Annie George Mathew, Dr. Manoj Panda, and Dr. Soumya Kanti Ghosh, is meeting with state government authorities in Bengaluru to discuss these matters.