Karnataka has urged the 16th Finance Commission to revise funding formulas for a fairer share of central taxes, highlighting a drop in its allocation and the need for better disaster relief. Chief Minister Siddaramaiah emphasized the state's economic contributions and called for restoring its previous tax devolution percentage. The plea includes demands for infrastructure funding and incentives for decentralization.
Karnataka's government has presented a series of demands to the 16th Finance Commission, arguing that current tax devolution criteria unfairly penalize the state despite its significant role in India's economy. Chief Minister Siddaramaiah stated that the state has placed 'just and constitutional demands' on behalf of its people, including fairer tax sharing, enhanced disaster relief, and special grants. He noted that Karnataka's share of central taxes fell from 4.71% under the 14th Finance Commission to 3.64% under the 15th, resulting in a loss of about ₹80,000 crore.
'If states were sharing ₹100 earlier, Karnataka received ₹4.71. The 15th Commission reduced it to ₹3.64, causing grave injustice,' Siddaramaiah said. The state, which leads in per capita productivity, seeks restoration of the 4.71% share or higher to reflect its contributions. It also requests raising the overall states' share of central taxes from 41% to 50% and capping cesses and surcharges at 5% of revenues.
Key concerns include the heavy weight given to 'income distance' in formulas, which the state wants reduced from 45% to 25%, arguing that per capita income alone masks inequalities. Karnataka criticized the shift in Gross State Domestic Product base year to 2011-12, which it says inflated its growth by 33% due to Bengaluru's IT boom, compared to 5.6% for other states. On population, it opposes using 2011 data over 1971 figures, viewing it as a penalty for controlling growth.
For disasters, with losses of ₹1.56 lakh crore from 2018 to 2024, Karnataka demands raising its risk factor points from 5 to 15 and better funding under response funds. It proposes a decentralization incentive formula weighting 60% to population, 20% to area, and 20% to devolution index. Specific requests cover ₹27,793 crore for Bengaluru infrastructure out of ₹1.15 lakh crore needed, matching grants for Kalyana Karnataka's ₹25,000 crore allocation, and a ₹10,000 crore package for environmental protection. Special grants are sought for ecologically sensitive regions like Malnad, coastal areas, and Western Ghats, plus irrigation support.
