Why Has Karnataka Called Out Modi Government For Financial Mistreatment?

Tamil Nadu and Kerala have joined the protests echoing Karnataka’s massive concern surrounding financial bias for the northern BJP-ruled states against the southern states. The protests underline one of the most crucial elements in months leading up to the Lok Sabha polls with the South Indian states united in its call against the North over the Union government’s financial bias in the recently concluded Lok Sabha. 

Karnataka's woes

According to Siddaramaiah and fellow legislators, the devolution of tax and other funds which the Centre owes to the state has made it difficult for the Congress-led state government to implement necessary drought relief measures in several areas of the states alongside the Centre withholding permission for irrigation and potable water-related projects in the state.

As pointed out by the CM, Karnataka is number two as far as tax collection is concerned, with Maharashtra taking the first position. “This year Karnataka is contributing more than Rs 4.30 lakh crores as tax. For every Rs 100 as tax that we are giving to the Government, we are only getting Rs 12-13 back, that is our share,” Siddaramaiah said.

In an impassioned speech, he further emphasised on the divide by pointing out that the UP gets more than 2 lakh crore in comparision to Karnataka’s 44,000 crores. “A movement is being made to protect the interest of Karnataka. The central government is unfair in tax distribution. Rs 1.87 lakh crore that should have come to Karnataka in five or six years has not come,” he added, talking about the need of the protest.

Highlighting the cohesion of the South and how it stands as the primary roadblock to a BJP clean sweep in Lok Sabha elections, the protest comes as a defining statement. Congress MP DK Suresh has reignited the issue of South treating itself as a different entity - pointing out the spate of problems that the non-BJP ruled states are having to face with, on a regular basis with clear discrimination in the forefront. “How much are we getting back? If it is not addressed in the 16th Finance Commission, then people of South India have to raise their voice, said Suresh.

With respect to the severe drought that has hit parts of Karnataka over the last few months of last year owing to critical monsoon deficit, it has also been reported that out of the total 236 taluks of Karnataka, 223 taluks are said to be drought ridden, with 123 of them severely affected. According to a social media post from the CM’s office, the state government had requested for “a compensation of ?17,901 crore from the Centre, even as the actual loss incurred by the state due to crop damage stands at ?35,000 crore. They have not released anything for drought relief either.”

As stated in a report by The Indian Express, the financial oppression on the Centre’s part has also seen inadequate GST compensation, which was also discontinued in June 2022. According to the state government, even during the years when it was active, Karnataka was not adequately compensated for the losses. For instance in 2017-18, when it was eligible for a compensation of Rs 11,044 crore, GST compensation received from the Centre was Rs 6,246 crore.

Complaints against the Finance Commission

Siddaramaiah and Karnataka Congress MPs have spearheaded the protests against the 15th Finance Commission(FC) along with other legislators from the neighbouring states of Tamil Nadu and Kerala, for sanctioning the alleged bias. The formula for devolution of tax proceeds is determined by the FC based on several criteria. The primary difference in the devolution criteria used by the latest Finance Commission and the one before is in the weightage given to population and in the Census data used - with the 1971 Census data being used by 14th Finance Commission, and the 2011 one used by the 15th, bringing in a fall in population weightage.

According to reports, this year’s Interim Budget, Uttar Pradesh received 18 per cent of the total share of the funds devolved to the states, while Andhra Pradesh and Tamil Nadu 4 per cent, Karnataka 3 per cent, Telangana 2 per cent, and Kerala 1 per cent, with Karnataka being the most affected. Priyank Kharge, Karnataka Minister for Rural Development, Panchayati Raj and Information Technology, said under the 14th Finance Commission, Karnataka's allocation was around 4.71%, which was slashed to 3.65% in the 15th Finance Commission, resulting in a loss of Rs 73,593 crore.