Karnataka, which is India's cash cow, must not starve, says minister Krishna Byre Gowda

'We understand that the Centre has responsibilities. We also understand that well-to-do states must share their resources with not-so-well-to-do states because we're all Indians. At the same time, you must factor in the basic needs and necessities of Karnataka,' he said.

With the debate on centre-state financial relations back in focus, Revenue Minister Krishna Byre Gowda, who represents Karnataka in the GST Council, tells DH’s Bharath Joshi that the state is preparing a strong case before the 16th Finance Commission (FC). Excerpts:

How is Karnataka preparing to present its case before the new 16th Finance Commission?

We've taken this exercise very seriously after the jolt we received under the 15th FC and the enormous cuts that Karnataka has been subjected to in the last 4-5 years. Karnataka forever has been a fiscally very prudent and sound state. Now, over the last 3-4 years, we're coming under increasing stress on account of decisions by the FC and Union government. If we get fair justice, we'll be on the path of fiscal soundness.

From 4.71 per cent under the 14th FC, the state’s share in central taxes dropped to 3.64 per cent under the 15th FC. What was the financial repercussion?

When we were getting 4.71 per cent, in 2018-19, our share in central taxes was Rs 35,895 crore. When it dropped to 3.64 per cent, our share was down to Rs 21,694 crore. These are the same years when the centre's budgets and revenues were increasing whereas our share dropped. Instead of Rs 35,895 crore becoming Rs 40,000 crore the next year and Rs 45,000 crore by 2021, we got about Rs 22,000 crore. Even if you discount Rs 10,000 crore due to factors such as Covid, we're still looking at a drop of Rs 13,000-14,000 crore every year. The Union budget has nearly doubled, but our share has stayed stuck stubbornly over 5-6 years. If you look at it from any economic angle, it’s a big blow to Karnataka's financial capacity.

The CM says that for every rupee of tax, Karnataka gets back 15 paise. How is this calculated?

We estimate that revenues from Karnataka to the Union government are in the range of Rs 4 lakh crore. In return, from our share in central taxes and grants-in-aid, we get Rs 50,000-52,000 crore. This straightaway comes to 10 per cent. Even if you factor in other investments that the Union government is doing in Karnataka, you can add another five percentage points. So that's 15 per cent returns on our contribution. Our view isn't that we need a rupee-to-rupee return. We understand that the Centre has responsibilities. We also understand that well-to-do states must share their resources with not-so-well-to-do states because we're all Indians. At the same time, you must factor in the basic needs and necessities of Karnataka. You can't starve your cash cow. It is imprudent to do that. We are the second biggest cash cow in the country. If you stifle us, it’ll not only hurt us, but also the entire household.

Why do you think the Union government would starve India’s cash cow?

I have no idea. They should answer this. Why is it that Karnataka ends up losing with every formulation they come up with? Look at SDRF allocation. We get Rs 929 crore while some states are getting Rs 1,500-3,000 crore. This is a state that has seen natural disasters in 14-15 years over the last two decades.

The criticism is that it was the Congress government that failed to make a strong case before the 15th FC.

The 15th FC visited Karnataka when the Congress-JD(S) government was in power. But the background pitch was already made by the previous Congress government. We made a very strong pitch. The problem was the mandate given to the FC by the Union government. Since 1971, every FC has taken the population ratio of 1971. It was a conscious decision made by the Parliament to freeze the ratio of population at 1971 because subsequently, many Indian states made enormous efforts to control population. It was a national security issue. Some states did extremely well in population control. But some states didn't give two hoots. The ratio of population between states was frozen at the 1971 rate so that those of us who, after 1971, invested enormously and supported the national cause by bringing down population growth rate are not penalised. However, the 15th FC, at the instruction of the union government, shredded this consensus that existed in the country for 30-40 years and took the 2011 population as the basis. This was a major setback to states like Karnataka.

Karnataka has argued that lack of development outside Bengaluru must be considered. Isn't it contradictory to say that Karnataka should be rewarded for being developed while you admit that not everything is good in the state?

It's not as contradictory as you point out. We're saying that we're a contributing state. Hence, reward us for our contribution. We're contributing more than Rs 4 lakh crore, so we should be rewarded proportionately. We're not hiding the fact of regional imbalance in Karnataka. Bengaluru is a growth centre for the whole country and the state. However, because of the economic assets created in Bengaluru, the overall state average per-capita income is shown as high. Per-capita income in many other districts is nowhere close to the state average. It is undesirable, but definitely not contradictory. We have a situation where one part of the state is generating all the income. It's the reality. Bengaluru’s IT/BT exports are worth Rs 3.5 lakh crore. What are we getting from this? It's not converting into income for us! There's no tax! I don't get any revenue. But it is being used to calculate my per-capita income.

On one hand, you want Bengaluru to be excluded. On the other hand, you want more weightage for Bengaluru because it attracts people from all over the country. Isn’t this also a contradiction?

I don't see the contradiction. While Bengaluru is skewing our income ratio, the city is supporting families across India. It's a great asset for the whole country. Benefits of Bengaluru are percolating. People working here are supporting families in their native states. Bengaluru has severe infrastructure challenges. For the city to grow and continue to create opportunities, the Union government must also invest in Bengaluru.

Even Mumbai will have a similar argument as a city.

If the Union government wants to invest in Mumbai, I'll welcome it. Mumbai is crucial for India. I'm sure Mumbai has got enormous investments from the Union government. Since you've invited me into this, I’ll say that the last elevated roads built around Bengaluru - Electronics City, Tumakuru Road and Airport Road - have enormously helped Bengaluru. In the last 10 years, we haven't received a single elevated road investment. It could have been on Old Madras Road to say the least. We pitched the peripheral ring road project to the NHAI. They've not owned that while investing heavily in Mumbai. I'm not against that. Everyone must survive and thrive.

You describe yourself as a die-hard federalist and that you're in favour of cross-transfers. What then is the problem when weaker states that require interventions get more funds?

I’m for sharing Karnataka's revenues with other states that are not so well-endowed. But every year, we're losing Rs 30,000-40,000 crore, which is having a direct impact on human development of our state. We're not asking for luxury.