Bengaluru: Higher borrowings, increase in excise duties and setting bigger revenue targets for various departments. That’s what Karnataka Chief Minister Siddaramaiah prescribed in his budget Friday as his government tries to bankroll the Congress party’s five chief electoral promises, including its free electricity scheme.
Presenting his first budget since his Congress government was voted to power in Karnataka, Siddaramaiah increased duty on all 18 slabs of Indian Made Liquor (IML) by 20 percent and on beer by 10 percent.
The state has also plans to revise guidance value — the minimum value of property decided by the government. This will also lead to an increase in stamp duty and registration taxes for home and property buyers, although the hike has not been explicitly mentioned.
These increases, which the government hopes will help more generate revenue, is significant especially in the light of the Congress government’s five chief guarantees — 200 units of free power (Gruha Jyothi), Rs 2,000 per month for women head of households (Gruha Lakshmi), free bus travel for women (Uchita Prayana), 10 kg rice/head to every economically backward home (Anna Bhagya) and financial assistance for unemployed graduates and diploma holders (Yuva Nidhi).
These guarantees — made in the form of electoral promises before Karnataka election on 10 May — is estimated to cost the state exchequer a substantial Rs 60,000 and are predicted to squeeze state resources.
In his speech, Siddaramaiah, who also has the finance portfolio, earmarked Rs 52,000 crore of the total outlay of over Rs 3.27 lakh crore, for the guarantees. He accused the Narendra Modi government of adding to the state’s decline in growth and increase in debt. According to him, Karnataka’s total outstanding debt at the end of 2022-23 was Rs 5.16 lakh crore — up from Rs 2.45 lakh crore at the end of 2017-18.
It’s significant to note that a coalition government of Congress and its then ally Janata Dal (Secular) fell after a political crisis in July 2019. It was followed by a BJP-led government B.S. Yediyurappa and then under Basavaraj Bommai.
“The economy deteriorated under the tenure of the previous government… Karnataka is known for strict adherence to fiscal discipline. However, the previous government has failed in following fiscal discipline during its tenure,” Siddaramaiah said, reading from his 112-page budget, adding that the state is expected to borrow Rs 85,818 crore this fiscal to make up for the shortfall in revenues.
This is the final budget of the current fiscal — while former CM Bommai had presented an interim one in February, his government lost the election in May.
This is Siddaramaiah’s 14th straight budget, although his seventh as chief minister.
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Revenue deficit budget
Siddaramaiah also presented his first ever revenue deficit budget Friday. According to him, total revenues are estimated to be Rs 2,38,409.81 crore while total expenditure is estimated to be Rs 2,50,932 crore — registering a revenue deficit of Rs 12,523 crore. The chief minister conceded that his government could not present a revenue surplus budget “because of the fund allocations to fulfil the guarantees”.
According to him, the government expects to earn additional revenue of Rs 1,000 crore each from excise and transport taxes, Rs 6,000 crore from stamps and registration taxes and Rs 1,500 crore from mines and geology. In addition, the government will borrow an additional Rs 8,000 crore, he said.
In February, Bommai presented a budget of Rs 3,09,182 crore — the first time the state’s budget breached Rs 3 lakh crore.
The Congress government has already implemented free public bus travel for women and is currently working out the modalities for the remaining. It has announced to give cash equivalent for additional 5 kg rice to all eligible beneficiaries until the state can find a steady supply of foodgrains.
It has also called for tenders to procure rice from the open market after the Centre discontinued its policy of allowing states to bid for rice and wheat from the central pool.
In February, Bommai had said Karnataka is projected to raise Rs 77,750 crore in the current fiscal and was expecting to receive Rs 37,252 crore by way of share in central taxes and Rs 13,005 crore in the form of grants from the union.
In his speech, however, Siddaramaiah accused the Union government of “not sharing resources” that belonged to Karnataka, adding to the state’s cash crunch.
“The central government does not share the cess and surcharges collected with the states as devolution. The increases in cess and surcharges imposed on taxes has decreased the tax devolution share to the state,” Siddaramaiah said.
The CM also attributed the state’s shortfall to the central government’s decision to discontinue giving GST compensation to the states. The decision, taken in July 2022, has led to a shortfall of nearly Rs 26,954 crore for the ongoing fiscal “which has caused severe impact on the fiscal position of the state”, he said.
The chief minister announced that as part of its “reprioritisation” exercise to make more financial room for the guarantees, the government will let go of “wasteful expenditure”. He, however, did not clarify what schemes will be cut.
The BJP called it a “political budget”. Bommai criticised Siddaramaiah for having dedicated nearly 50 paragraphs in criticising the BJP.
“They (Congress) said that they require Rs 52,000 crore to fulfil the guarantees. Since almost half the year is over, there was no need to increase taxes nor take more loans,” Bommai told reporters.
(Edited by Uttara Ramaswamy)
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