‘Be realistic’: Karnataka warned against Rs 10,000-crore rural road plan

“Starting a project that demands thousands of crores which is not budgeted and funds are not earmarked, will create issues for cash flow and fiscal management,” the Finance Department stated.

The department noted that the state “has already exhausted its borrowing capacity to meet the budgetary announcements of the year (20)26-27… The state will not have any space to borrow any more amounts to fund any new projects of this magnitude.”

The fiscal deficit in the 2026-27 financial year was Rs 22,957 crore as against a permitted limit of zero, and cumulative liabilities were at 24.94 per cent of the Gross State Domestic Product — compared to a permitted limit of 25 per cent under the Fiscal Responsibility and Budget Management Act, it stated.

The Finance Department has noted that the state government had a balance cost of works exceeding Rs 2 lakh crore and pending bills to contractors worth Rs 36,136 crore. It said it had cleared an additional Rs 5,000 crore worth of works in the first supplementary estimate on the budget presented recently.

“Karnataka is reeling under severe drought, and substantial amounts may be needed to address the immediate issues of livelihood of farmers and of the people living in rural areas this year. There is also likely to be an increase of Rs 4,000-5,000 crore in the IP set subsidy as a result of the drought,” the note said.

The department said it would be “prudent to be realistic regarding the funding envelope that is available and not to add further to the overhang of pending balance cost of works. Before finalising the additional resources mobilisation or reallocation from already approved allocations, it would be difficult to fund new projects.”

BJP stages protest

Meanwhile, the government’s decision to launch new projects while concerns remained about its finances has led to a protest from the Opposition. BJP legislators staged a demonstration inside the Vidhana Soudha premises on Wednesday, where BJP state president and MLA B Y Vijayendra demanded that the government release a White Paper on the state’s financial condition.