From Our Special Correspondent
Daijiworld Media Network

Bengaluru, Jun 26: The centrally appointed 15th Finance Commission has noted that Karnataka has been maintaining a revenue surplus continuously since 2004-05 and has recorded the third highest own tax revenue to gross state domestic product (GSDP) ratio of 7.2% in 2016-17, which is next only to Chattisgarh and Telangana in the entire country.

The Commission has observed that Karnataka’s own tax revenue to gross state domestic product ratio was better than the national average for all States at 6.2%.

Karnataka chief minister H D Kumaraswamy, who met the 15th Finance Commission chairman along with his senior cabinet colleagues and officials in Delhi on Tuesday, explained the financial position of the State.

The Commission noted that that the state’s contribution to GDP of the country was 7.9% in 2018-19.

In 2018-19, the share of primary, secondary & tertiary sector in GSVA (current prices) of the state was 11%, 21% and 68%, respectively.

Karnataka’s per capita NSDP was Rs. 2,07,062 against per capita income of Rs. 1,26,406 for India.

The state’s share in inter-se devolution was 4.713 based on the recommendations of the 14th Finance Commission is less than its share of 5.05% in total population of the country.

On the state’s fiscal parameters, the Commission noted that Karnataka is first State in the country to have enacted Fiscal Responsibility and Budgetary Monitoring (FRBM) Act.

In 2014, state government amended Karnataka Fiscal Responsibility Act, 2002 to provide for inclusion of Off Budget Borrowings that are to be repaid from the state government's budget in ‘Total Liabilities’ to provide true picture of sustainability of debt.

In 2016-17, the state had incurred lowest committed expenditure (salary, pensions and interest payments) at 25.1% of total revenue expenditure as compared to that of 41.7% for all states.

The state had fourth lowest debt to GSDP ratio of 18.3% in 2016-17 (after Chhattisgarh, Assam, and Maharashtra) amongst all 29 states.

Regarding the health outcomes of Karnataka, the Commission observed that the performance of state on most of the health indicators is better than all India’s average.

Karnataka has been able to achieve the target of aggregate technical and commercial (AT&) losses as per Ujwal Discom Assurance Yojana (UDAY) memorandum of understanding (MoU) in each year from 2015-16 to 2017-18.

In 2017-18, the AT&C losses of Discoms of the state were 14.48% against the target of 15%. Further, the State has been able to achieve targets of most of the UDAY barometers such as ACS- ARR gap, smart metering, feeder segregation etc.

The Commission expressed concern about the state’s GSDP - growth rate of GSDP (constant prices, 2011-12 series) of Karnataka has fluctuated widely from 2012-13 to 2018-19, compared to GDP (constant prices, 2011-12 series) of India.

The other fiscal parameters of concern were:

• As per the presentation made by Pr AG Karnataka, the buoyancy of non- tax revenue (NTR) of state has plummeted from 1.30 in 2015-16, 0.75 in 2017-18 to 0.38 in 2018-19(P).
• Off-budget borrowings of the state increased from Rs. 1,853.62 crore in 2011-12 to Rs. 13,173.44 crore in 2017-18. The off-budget borrowings as a percentage of outstanding debt of the state government rose from 1.80% in 2011- 12 to 5.65% in 2017-18.
• As per the presentation made by Karnataka, in 2018-19, there was GST revenue shortfall of Rs. 12,407.75 crore for state as compared to the protected revenue, which is more than 23% shortfall.
• Since 2017-18, state government has announced three crop loan waiver schemes, entailing estimated outgo of Rs. 47,419 crore.

Major issues raised by the state government:

• GST revenues are not up the mark as the structural rates of VAT were superior to GST rates of goods and expected revenue from service tax component is not accruing to Karnataka.
• The state share of Centrally Sponsored Schemes shall be decided and adhered to the FC award period in order to ensure predictability for managing the state resources to fund the state share.
• SDRF grants need to be increased.
• Special grants (state- specific) amounting to Rs 1,42,260 crore has been asked for by Karnataka.
• The state has also asked for special funding for Bengaluru city as it plays an important role in employment generation for the country and as a growth engine to the national economy.

The Commission noted all issues raised by the state government and assured to address them in its final report to the union government.