Release special grants, state specific grants as per 15th Finance Commission: Siddaramaiah writes to Sitharaman

Bengaluru, Aug 21

Karnataka Chief Minister Siddaramaiah has written to the Minister for Finance Nirmala Sitharaman to release special grants and state specific grants as recommended by the 15th Finance Commission.

The letter dated August 19 reads: “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. Karnataka has seen the steepest cut of 23 per cent because of the reduction in the devolution share.

“Karnataka has lost out heavily on the Income-Distance criteria adopted by the commission. The introduction of new methodology for compilation of GSDP has dramatically raised State’s GSDP in 2011-12 series by over 30 per cent as against average increase of less than nine per cent for all States put together.

“The increase in GSDP at absolute level was similarly reflected in a step up in per capita income affecting the standing of 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 15th Finance Commission.

“Even though the IT related services contribution has increased the GSDP of the State significantly in the 2011-12 series, there is no corresponding contribution of these services to the State taxes as exports of IT services are zero rated.

“The decrease in tax devolution share to Karnataka by 15th Finance Commission when compared with 14th Finance Commission recommendation, has decreased the total tax devolution to State by Rs 37,011 crore in past four years, from FY 2020-21 to FY 2023-24.”

The letter also mentions 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 Government of India has not considered the Commission’s recommendation.

“In the final report for 2021-26, the Commission awarded State Specific grants of Rs 6,000 crores to Karnataka for Holistic Improvement of Water bodies of Bengaluru and for Peripheral Ring Road. However, 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.

It said that however, no grants have been released so far to the State of Karnataka and this has been a major setback to the State Fiscal Position which is already strained due to 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,” reads the letter.