Karnataka to seek more fund share from finance panel
Bengaluru: Reeling under a severe resource crunch following revenue shortfall from tax collections and reduction in central grants, Karnataka would seek more share of funds from the 15th Finance Commission, an official said on Friday.
“We will soon petition the 15th Finance Commission to increase the state’s share from central taxes to make up for the reduction in allocation for the ensuing fiscal 2020-21,” a finance department official told IANS here.
Presenting the 2020-21 state Budget in the Assembly on Thursday, Chief Minister B.S. Yediyurappa lamented that the 15th finance panel had reduced the state’s share by Rs 11,215 crore to 3.64 per cent (Rs 28,591 crore) for the next fiscal after the 14th Commission reduced it by Rs 8,887 crore from 4.70 per cent (Rs 39,806 crore) to Rs 30,919 crore for fiscal 2019-20.
“As the panel’s allocation advice to the Centre is applicable to one year (2020-21), we will plead for enhancing the state’s share for four years from 2021-22 to 2025-26,” the official asserted.
The state also suffered Rs 3,000 crore compensation loss from the GST regime due to lower realisation of indirect tax collection by the Union Finance Ministry in the outgoing fiscal (2019-20).
“The reduction forced us to cut expenses of many departments that were allocated in the 2019-20 vote-on-account Budget former Chief Minister H.D. Kumaraswamy presented in mid-February 2019 and Yediyurappa endorsed on July 29, as the Assembly had to pass it by July 31 for ensuring the treasury operations,” said the official.
The commission reduced Karnataka’s share by giving higher ratings to the income distance parameter and focusing more on poorer states.
As information technology services contribute a whopping 25 per cent of the Gross State Domestic Product (GSDP), the per capita income in Karnataka is more than in other states.
“Karnataka is ranked low in the income distance parameter, as software exports are tax exempted and hence the IT sector does not contribute to the state’s coffers (revenue),” noted the official.
With the major part of the expenditure going into salaries, pensions and paying interest on loans, the departments did not have enough funds to spend, as there was no proportionate increase in resources.
“Compensation to flood victims, their rescue and rehabilitation and restoration of infrastructure damaged in heavy rains and flash floods in August across the coastal, central and northwest regions also caused financial stress due to resource crunch,” added the official.
As against an estimated loss of Rs 35,160 crore by floods, the Centre gave the state only Rs 1,805 crore, forcing the government to divert funds earmarked in the 2019-20 Budget to departments and state-run flagship schemes.