'Karnataka is being short-changed'

'Karnataka is being short-changed, Modi govt does not believe in federalism’ 

Krishna Byre Gowda

The Narendra Modi government is penalizing progressive states such as Karnataka and Kerala by tinkering with devolution of central taxes, according to Congress leader Krishna Byre Gowda. The former minister, who represented Karnataka in the GST Council, tells Bharath Joshi that the state stands to lose under the 15th Finance Commission.   

Karnataka’s share in the devolution of central taxes seems to be shrinking. 

Overall, under the 14th Finance Commission, we’ve already accumulated a huge shortfall. Between 2015 and 2020, the cut in devolution to Karnataka will be about Rs 15,000-20,000 crore. Earlier, the Centre would try to make up in subsequent years, so the shortfall used to be Rs 2,000-3,000 crore. This time, the shortfall is 10 times more. 

This fiscal, Karnataka could lose about Rs 9,000 crore under devolution. 

This is a blatant violation of the Constitution itself. Even on the GST front, the Centre had agreed to release compensation in a time-bound manner, which is being violated. There’s an utter disregard for Centre-state relations and they’re muzzling cooperative federalism. When was the last time the National Development Council was convened where all states were heard by the Centre? We must say that this government is against the intentions of the Constitution and that it doesn’t believe in a federal polity. 

The previous 14th Finance Commission recommended increasing devolution to states from 32% to 42%. Has Karnataka really benefitted from it? 

We have proven with facts and figures beyond any doubt that this increase was against the interest of Karnataka. We were actually losing money. You might see this as a purely political statement. When they increased devolution, funds for centrally-sponsored schemes were cut. And this cut was more than the increase in devolution. There were cuts for drinking water, Rashtriya Krishi Vikas Yojana, Anganwadis, women & child development, Sarva Shiksha Abhiyan and other schemes. The intention (of the Finance Commission) was to increase devolution without altering current programmes. But it (the Modi government) played a trick on the states. 

Karnataka, among other states, strongly opposed the terms of reference of the 15th Finance Commission.

Broadly, Karnataka has three concerns. One, progressive states should not be penalized just because we do well in resource mobilization and we’re ahead of other states in implementing programmes, and ahead of the national average. We end up getting less money on central schemes because we would have already done it. Efficiency should be rewarded, not penalized. Two, the Centre has proposed to reward states that didn’t do enough to optimize population growth. This will adversely affect progressive states like Karnataka and its southern neighbours, which took population control very seriously. We’re doing India a service by bringing the population growth rate down. Three, Karnataka has been getting a pittance for natural calamity relief, be it flood or drought. We have the highest rate of natural calamities.

In the last 20 years, the state has suffered the highest number of calamities. But the money we get is meagre compared with other states. 

And what can we expect? 

We have made a convincing case to the Finance Commission, so let’s see. In fact, the recommendations of the 15th Finance Commission should have been implemented from this Budget or the new financial year. But again, the Centre hasn’t shown respect towards the norms. 

The 15th Finance Commission is of the view that the fiscal equalization it is recommending is for the present needs of the states, which are best represented by the latest Census data.  

1970 onwards, up until 2000 and even 2010, there was a national consensus agreed upon in Parliament and passed into law that we will keep the 1971 Census as the basis for important decision-making, especially Finance Commission allocations and the number of seats in Parliament. If states like Karnataka, Kerala and Andhra Pradesh hadn’t controlled their population, we would not have been losing out today. It was an Act of Parliament that we respected and subsequently we were assured that we won’t be penalized. But now, under the Centre’s pressure, the Finance Commission is taking a stand against that law.

Also, my big worry is that this is just an opening that the Centre is creating to alter the structure of Parliament itself. Meaning, South India will lose its voice while the BJP tries to cater to its base. 

Is it that Karnataka has become more dependent on central funds over the years? 

Notwithstanding the injustice done to us following the 14th Finance Commission, we coped with lesser allocations and managed to meet our development requirements. What we’re asking for is not a largesse or charity. It’s the right of the people of Karnataka. If we get those funds, we can invest more on infrastructure. Bengaluru is a national city more than any other city, because people from every state come here. So, investment on Bengaluru is a national investment. The Peripheral Ring Road itself will cost Rs 15-20,000 crore, the suburban rail will need Rs 30,000 crore. 

How is that not depending on the Centre?

It is not. Collection of some taxes are with the state and some with the Centre. Just because taxes are collected by the Centre doesn’t mean it belongs to them. The Centre, in the case of income tax, for example, is just the collection agent. Once collected, sharing is decided by the Finance Commission. We’re only demanding our rightful share. 

Some see this as being insensitive to the needy states. 

We’re not insensitive. Karnataka contributes to the national pool and a lot of money raised by the state is helping the Centre and the needy states; we’re happy about that. We fully respect and celebrate the prospects of other states. But while we continue to share, we need to take care of our needs as well. A Union isn’t a Union if we don’t share.

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