16th Finance Commission should address disparity between ‘economic and political engines’: Karnataka CM’s economic advisor Basavaraj Rayareddy

Q: Karnataka was one of the aggrieved states when it came to resource allocation by the 15th Finance Commission. How do you plan to address this during the consultations by the 16th Finance Commission?

Basavaraj Rayareddy: Definitely, the 15th FC recommendations were not beneficial for Karnataka. I don’t know why it did such an injustice to Karnataka as we were getting good funds under 14th FC. Because of the 15th FC, our share of taxes was reduced by around Rs 65,000 crore in five years, apart from the fact that other extra funds promised to us were denied. Due to this, we lost nearly Rs one lakh crore.

Now, Chief Minister Siddaramaiah and the Finance department under him will convince the members of 16th FC that Karnataka needs extra money to create infrastructure, especially in Bengaluru. It is one of the global cities and has a high migration rate. Every year there is 10 per cent migration to the city, which is the highest in Asia.

People from other states and nations are coming and settling here because of the friendly attitude of the entrepreneurs. We have all the right conditions in Bengaluru. But, infrastructure development is essential for the city. For that infrastructure, we need money from the Government of India. The state government cannot do anything. We need two hands to clap.

Q: What went wrong when the 15th Finance Commission came here? Why did Karnataka get less?

Basavaraj Rayareddy: The parameters of 15th FC were totally different. Prime Minister Narendra Modi himself was directly involved as he wanted to give more funds to Bihar, Uttar Pradesh and Rajasthan.

Through such behaviour, they are depriving the southern states. They seem to be not happy with them. There might be a political reason for this.

I think it is high time for us to take up the matter with the finance commission.

Q: What measures will you propose the 16th Finance Commission to address the disparity?

Basavaraj Rayareddy: The Finance department is preparing for all the queries the Finance Commission will pose. Unless it is finalised, I cannot comment on that. We are giving a proper representation about how we have been deprived by the last finance commission.

But our main concern is to make sure that all the shortcomings in the 15th finance commission are addressed by the next one.

Q: Are you seeking much more than the 3.642 per cent share in GST devolution allocated under 15th Finance Commission since under the 14th Finance Commission it was 4.71 per cent?

Basavaraj Rayareddy: I think the Centre should devolve five per cent to the state this time, so that the losses suffered over these five years can be recovered.

Q: What are your suggestions as the economic advisor to the CM?

Basavaraj Rayareddy: Currently, the GST distribution is 50:50 between the Centre and the states. But, who is making the efforts to collect taxes? The states. What is the Central government doing? Nothing.

Without any effort, the Centre is getting 50 per cent of the tax collected. That is why I have suggested to the CM and the Finance department to make sure that the devolution is 65:35 or 60:40 in favour of the states. The states should get a minimum of 60 per cent.

It is applicable not only to Karnataka, but to other states as well. I want to appeal to all state Finance ministers to back the proposal of increasing the share devolved to the states.

Q: Are there demands that the Cess collected by the Centre be shared with the states?

Basavaraj Rayareddy: All the Cess collected goes to the Government of India, which is not correct. States should also be given a 50 per cent share. This is also one of my suggestions. Later, the CM will take a call on that.

Q: Karnataka CM Siddaramaiah skipped the recent NITI Aayog meeting and the state government went ahead to protest in New Delhi earlier this year. What do you make of this tussle? Has it helped?

Basavaraj Rayareddy: We are aggressively demanding our due share of taxes and other funds. But, the Government of India is not bothered. The Modi government does things its own way and does not want to listen to others. It is very unfortunate that they do not have respect for the federal structure.

Q: Do you think Karnataka and other southern states like Kerala and Tamil Nadu are feeling alienated?

Basavaraj Rayareddy: Southern states are deprived by the Government of India for various reasons, mostly political ones. Kerala, TN (Tamil Nadu), Telangana and Karnataka are ruled by Opposition parties. But, most of the revenue —around 60 per cent — comes from the southern states.

But what we get back is quite less.

This is why I said in the past that the southern states are like economic engines, while northern ones are political engines. Centre is taking fuel from us and feeding the Northern states for political dividends. Southern states too must get their due share.