Reduced devolution hits Karnataka’s finances; lawmakers cry for funds

The devolution from the Centre reduced from ₹39,806 crore in 2019-20 to ₹28,591 in 2020-21. Now the state may further lose another ₹6,000-₹7,000 crore this year

BJP, Congress, Siddaramaiah, Karnataka Assembly polls, elections, Varuna,
Political analysts believe that in the 2018 polls, Siddaramaiah made the major mistake of giving up Varuna for son Yatindra and contesting from the Vokkaliga bastion of Chamundeshwari. He lost the seat | File photo

Transport department employees in Karnataka have said they will go on strike later this month as the government has failed to pay their salaries and also honour the promises it made during an earlier strike in December 2020.

Salaries of nearly 1.25 lakh employees across the board — the Karnataka State Road Transport Corporation (KSRTC), the Bangalore Metropolitan Transport Corporation (BMTC), the North Eastern Karnataka Road Transport Corporation (NEKRTC), and the North Western Karnataka Road Transport Corporation (NWKRTC) – are due for two months.

Besides, their earlier demands – to treat them on a par with other state government employees, cover them under the Arogya Sanjeevini health insurance scheme, and 30 lakh ex gratia for the families of employees who succumbed to COVID-19 – are yet to be met by the state.

The government in December promised in writing to meet their demands. But now, Transport Minister Laxman Savadi has expressed helplessness over the financial crisis.


Several other ministers — from the panchayat raj department to women and child development and animal husbandry — in Karnataka assembly took up the issue of fund shortages for development projects.

One of the legislators, MP Kumaraswamy, said he could not even visit his constituency as lack of funds had stalled road works and he was not ready to face people.

While a strict fiscal discipline enabled the state to remain consistently revenue surplus since 2004–05, the reduced pie of devolution from the Centre is a concern for the state.

The BS Yediyurappa government steered industries to resume operations amid COVID conditions to meet the fiscal target. But the delay in compensation of taxes to Karnataka by the Centre due to a dip in overall taxes and reduced GST devolution came as a major blow to the state.

The 15th Finance Commission has recommended that the states be given 42 per cent of the divisible tax pool of the Centre during the period 2021-22 to 2025-26. The share of states in net proceeds of tax revenues was reduced to 41 per cent from the earlier 42 per cent. The government cited security and special needs of newly formed union territories of Jammu and Kashmir, and Ladakh as the reason for this reduction.

The bogey that the southern states get is more a political decision than a rational one.

As a result, as per the Finance Department data, the devolution from the Centre reduced from 39,806 crore in 2019-20 to 28,591 in 2020-21. Now the state may further lose another 6,000-7,000 crore this year. Up until November, only 12,192 crore (42.64 per cent) were devoluted.

The Centre had even rejected the proposal for a special grant mentioned in the 15th Finance Commission, a compensation worth 5,495 crore to Karnataka over the sudden reduction in devolved funds for the year.

Also Read: Southern states cry foul as finance panel recommends fund cut

Given the financial condition of the state, Yediyurappa had in January indicated that the outlay for the coming fiscal (2021-22) would be downsized (by at least 10 per cent) as a fallout of the COVID-19 crisis. The CM had tabled the 2020-21 budget with an outlay of 2,37,893 crore, with no prominent new schemes in the list.

The tax revenues fell short by 14.69 per cent and the devolution fell short by almost 39 per cent as of November compared to last fiscal.

In a series of tweets, Congress leader Siddaramaiah targeted the government over its inaction in seeking more funds from the Centre and also losing on the state’s share. He compared the current BJP government to a broken-down bus in the middle of the road, saying it was blocking the progress of Karnataka.

Siddaramaiah remarked that during the UPA rule, between 2010-11 and 2013-14, the 13th Finance Commission had recommended 45,713 crore to Karnataka and the actual devolution was 47,036 crore (an increase by 1,323 crore). Comparing with the NDA rule, he said between 2014-15 and 2019-20, though the Finance Commission recommended 2,03,039 crore in devolution to Karnataka, the state received only 1,65,963 crore (losing 48,768 crore), 18 per cent short of the estimate.

“Karnataka contributes more than 2.2 lakh crore to the central government in the form of various taxes. But Karnataka gets only 28,581 crore on paper. If we consider 41 per cent devolution as promised, Karnataka should have got at least 70-90,000 crore,” the former CM said in a tweet.