Karnataka may slash education, health spends to fund Rs 75k-Cr Upper Krishna Project

With a projected revenue shortfall of Rs 22,000 crore and no room for fresh borrowing, the finance department has warned that only across-the-board cuts can free up money for the Upper Krishna Project.

Bengaluru: Karnataka must slash developmental spending across the board as that is the only option to fund the Upper Krishna Project (UKP), the finance department has said, revealing how grim the state’s fiscal woes are, and with frightening implications.

For the UKP, the government will incur an additional expenditure of Rs 75,000 crore over the next four years, requiring around Rs 18,000 crore annually, based on new compensation rates approved by the Cabinet for acquisition of 1.33 lakh acres.

Money for this can come from a 20% cut in the developmental outlay of Rs 80,197 crore (excluding the ‘guarantee’ schemes and committed expenditure), freeing up Rs 16,039 crore, the finance department said in an internal note, which DH has reviewed.

The cuts will hit education, healthcare, urban development and other departments.

If department-wise allocations are not cut, then the government will have to unlock Rs15,000 crore by scaling down on the flagship ‘guarantee’ schemes and subsidies for irrigation pump sets, the finance department, which reports to Chief Minister Siddaramaiah, has said. The government is spending Rs 51,034 crore on the ‘guarantee’ schemes this year.

Under the UKP, the height of the Almatti Dam will be raised to irrigate 5.94 lakh hectares in Vijayapura, Bagalkot, Raichur, Kalaburagi, Yadgir, Koppal and Gadag districts, making it a crucial project for north Karnataka.

Fund cuts are the only way forward as resource mobilisation seems unviable.

In the current fiscal, the state is projected to face a revenue shortfall of Rs 22,000 crore against the estimated revenue receipts of Rs 2.92 lakh crore.

In just the first five months of the fiscal year, the state has suffered a shortfall of Rs 7,413 crore, the finance department said.

Also, the state is likely to lose Rs 6,000 crore due to GST rationalisation. Plus, it will miss Rs 3,000 crore in mining tax, which it cannot levy as President Draupadi Murmu has not approved the enabling law.

The finance department has ruled out any tax hikes next year as the government has already made upward revisions on various levies.

In 2025-26, Siddaramaiah wants to borrow Rs 1.16 lakh crore, which the finance department says is the maximum the state is eligible for. Raising more loans will mean a fiscal deficit exceeding 3% (it is 2.95% now) and total outstanding liabilities breaching 25% (from the present 24.91%) of GSDP, violating the fiscal responsibility law. This situation will continue for the next four years, the finance department said.

The Congress government is already under fire from the BJP over fund shortage and fiscal stress caused by ‘guarantee’ schemes. Siddaramaiah, however, has claimed that he inherited bad finances of previous BJP government.