New Delhi: Karnataka’s MLAs and MPs will protest against the central government’s tax devolution policies Wednesday in New Delhi, Karnataka Chief Minister Siddaramaiah has said.
“On February 7, all ministers, MLAs of both Houses of the legislature, and MPs, will demonstrate against the government of India for the injustice caused to Karnataka by the 15th Finance Commission, and against several other issues concerning the state, including grants from the Centre,” Siddaramaiah said at a joint press conference with deputy chief minister and KPCC president D.K. Shivakumar.
With this, Karnataka joins Kerala, Telangana, and Tamil Nadu to oppose the Centre’s policies regarding tax devolution and grants to states.
The matter also assumes importance in light of the fact that the 16th Finance Commission — the only body that can recommend changes to the tax devolution and grants formulae — has been formed and has to submit its report by October 2025.
According to Siddaramaiah, Karnataka’s share in the total tax devolution transferred by the Centre to states fell from 4.71 percent — as recommended by the 14th Finance Commission — to 3.64 percent, as recommended by the 15th Finance Commission. This, he added, resulted in a loss to the state of Rs 62,098 crore in taxes.
Responding to similar allegations made by Congress leader Adhir Ranjan Chowdhury in the Lok Sabha, Union Finance Minister Nirmala Sitharaman said Monday that the tax devolution process was a well-established system and that she lacked the discretion to manipulate Finance Commission recommendations.
She added the Finance Commissions arrived at their recommendations following extensive engagements with various stakeholders, including state governments.
Also read: ‘Centre gives only Rs 21 per Rs 100’ — Kerala minister questions ‘neglect’ of state in budget speech
South united on issue
Karnataka’s call for a protest follows similar objections raised by Kerala, Tamil Nadu, and Telangana. Kerala has taken the Centre to the Supreme Court over limits the latter has imposed on states on the amount they can borrow.
“Kerala cannot remain a mute spectator against the hostile approach of the central government which is pushing the state towards the worst financial crisis in its history,” Kerala Finance Minister K.N. Balagopal said in his Budget speech on Monday.
“Instead of waiting for justice from the central government, the state government will utilise all its resources to raise capital investments from private and public sectors, thereby ensuring speedy implementation of all its programmes,” Balagopal added.
Last June, Telangana Minister for Finance and Health T. Harish Rao rebutted statements by Union Minister G. Kishan Reddy, calling them “baseless”.
According to Rao, despite the 15th Finance Commission recommending that 41 percent of central taxes be devolved to states, the actual amount the states were receiving was only about 30 percent since the Centre was relying more on cesses and surcharges, which do not need to be shared with states.
Telangana’s share in tax devolution from the Centre had decreased from 2.893 percent in 2014-15 to 2.102 percent in 2021-22, he added.
More recently, in October 2023, Tamil Nadu Finance Minister Thangam Thennarasu accused the Centre of “betraying” Tamil Nadu over the matter.
“In devolution of share of tax revenue, Tamil Nadu is not getting its due share,” Thennarasu said. “When we pay Rs 1 to the Government of India, the Union government devolves only 29 paise (to Tamil Nadu). But Uttar Pradesh, where BJP is in power, gets Rs 2.73 in return for a contribution of Rs 1. Between 2014-15 to 2021-2022, TN contributed Rs 5.16 lakh crore to the country’s direct tax revenues, but in return, the state received only Rs 2.08 lakh crore.”
(Edited by Tikli Basu)