Karnataka is set to receive Rs 11,173 crore more in tax devolution for the 2026-27 fiscal compared to the current financial year after the 16th Finance Commission’s decision to raise the state’s share in the divisible pool to 4.1%, up from 3.6% recommended by the previous panel. The state will receive Rs 63,049 crore for the fiscal beginning April 1, an increase from the current Rs 51,876 crore. The panel had submitted its report to the Union govt on Nov 17 last year. Finance minister Nirmala Sitharaman tabled the report in the Lok Sabha Sunday, with the Centre accepting the commission’s recommendations.
However, governing Congress is disappointed since it had pushed for at least a 5% share. Claiming that the 15th Finance Commission’s move to reduce Karnataka’s share to 3.6% from 4.7% resulted in a loss of nearly Rs 80,000 crore, the govt had demanded a share proportionate to its contribution to the gross domestic product (GDP). It had also sought an increase in the cumulative share of states to 50% from the existing 41%, along with a share in cess and surcharges. The 16th Finance Commission, headed by economist Arvind Panagariya, ignored these demands and retained states’ vertical share at 41%. “The govt has accepted the recommendation of the Commission to retain the vertical share of devolution at 41%. As recommended by the Commission, I have provided Rs 1.4 lakh crore to states for the FY 2026-27 as finance commission grants. These include rural and urban local Body and disaster management grants,” Sitharaman said. The decision drew sharp criticism from the Congress govt in Karnataka. Chief minister Siddaramaiah said the state was handed a “chombu” (empty vessel). “We had made a strong case before the 16th Finance Commission, but the state has been given a raw deal,” Siddaramaiah said. “In contrast, NDA-governed states including Uttar Pradesh (17. 6%), Bihar (9.9%), Gujarat (3.7%), Maharashtra (6.4%) and Andhra Pradesh (4.2%) have been favoured. As for the Union Budget, it is the most disappointing and lacks far-sightedness.” Basavaraj Rayareddi, economic adviser to the CM, said Karnataka would have received an additional Rs 25,000 crore had its share been increased to 5%. Siddaramaiah also said the state had sought central funding for major irrigation projects, including Upper Krishna Phase III and Upper Bhadra, but it found no mention in the Union Budget. “We even sought national project status for UKP-III and had urged the Centre to pay Rs 5,300 crore for Upper Bhadra project which Sitharaman had announced in the 2023-24 budget,” he said. “The Centre has also failed to clear the Mekedatu and Mahadayi projects despite repeated reminders. While our govt has allocated Rs 5,000 crore to Kalyana Karnataka Regional Development Board, we sought a matching grant from the Centre. There is a response in the budget to these demands.” On the proposed high-speed rail links connecting Bengaluru with Hyderabad and Chennai, Siddaramaiah said these projects would largely benefit Telangana and Tamil Nadu. He said it would have been more beneficial had the Centre approved a high-speed rail corridor linking Bengaluru with Pune and Mumbai.
