Siddaramaiah seeks ‘fair share’ of central tax revenue
The chief minister highlighted that Karnataka’s share in tax devolution saw a sharp decline under the 15th Finance Commission, falling from 4.713% to 3.647% — a reduction of over 23%
Chief minister Siddaramaiah on Tuesday met Union finance minister Nirmala Sitharaman in New Delhi and sought a fairer share of central tax revenues for the state under the 16th Finance Commission, arguing that the current formula disproportionately penalises states like Karnataka that contribute significantly to the national economy.
During the meeting, the chief minister highlighted that Karnataka’s share in tax devolution saw a sharp decline under the 15th Finance Commission, falling from 4.713% to 3.647% — a reduction of over 23%. This, he said, translated into an estimated cumulative loss of ₹80,000 crore over the award period, including the denial of special grants worth ₹11,495 crore.
“We have brought to the finance minister’s attention that Karnataka has been unfairly impacted by the existing devolution formula, especially due to the over-reliance on the income-distance criterion, which carried a 45% weightage under the 15th Finance Commission,” Siddaramaiah said after the meeting.
He urged the Union government to advocate for a more growth-oriented approach in its submission to the 16th Finance Commission. “We have requested that the weightage for the income-distance criterion be reduced by 20 percentage points and reallocated to fiscal contribution, which reflects a state’s share in the national GDP,” he said.
The chief minister also objected to the current design of Revenue Deficit Grants, which he argued are misaligned with fiscal discipline objectives laid out under the Fiscal Responsibility and Budget Management (FRBM) framework.
“Revenue deficit grants, in their current form, contradict the spirit of fiscal discipline. We have suggested that the same amount — which was 1.92% of Gross Union Receipts under the 15th Finance Commission — be distributed among all states using the horizontal devolution formula,” Siddaramaiah said.
He also flagged the unique developmental challenges faced by regions such as Bengaluru, Kalyana Karnataka, and Malenadu, stating that a fair devolution policy would help accelerate growth and bridge regional disparities.
“This is not a plea for special treatment. Karnataka’s proposals are intended to strengthen national resource mobilisation and uphold the spirit of cooperative and competitive federalism,” he said.
Siddaramaiah concluded by urging Sitharaman to incorporate Karnataka’s proposals in the Union government’s official memorandum to the 16th Finance Commission. “A pro-growth devolution approach will empower every state to contribute meaningfully to India’s development journey,” he said.
The 16th Finance Commission, set up in December 2023 under the chairmanship of Arvind Panagariya, is expected to give its recommendations by October 31, 2025, which will be applicable for a five-year period beginning April 1, 2026.
The 15th Finance Commission headed by N K Singh had suggested that states be given 41% of the divisible tax pool of the Centre for a five-year period from April 2021 to March 2026.
With inputs from PTI
