BackDelay in compensation in taxes to Karnataka due to overall dip in tax collection: FM
Sitharaman’s comments come at a time when the Yediyurappa-led govt has been facing severe fund crunch ahead of the state budget that will be presented on 5 March
PremiumBengaluru: Union Finance Minister Nirmala Sitharaman on Monday said that the delay in compensation in taxes to Karnataka was due to overall dip in collections across the country. The centre has been trying to release funds in tranches to the state governments, she said.
“The compensation cess collection and GST (goods and services tax) collection had dipped in September-October, 2019. So we didn’t have adequate money to pay for the compensation at that time," she said in Bengaluru.
Sitharaman added that before December the Centre had released a tranche for the two earlier months and the rest shall be cleared in two installments.
She added that this was not just the case with Karnataka but with all other states.
Sitharaman’s comments come at a time when the B.S.Yediyurappa-led Bharatiya Janata Party (BJP) government has been facing severe fund crunch ahead of the state budget that will be presented on 5 March.
Hit hard by the floods last year and the inadequate compensation for relief from the Centre, the Yediyurappa government is now being forced to defend the Narendra Modi-led government, which has further cut Karnataka’s share in the divisible pool and is yet to receive its share of GST, devolution of taxes and other grants.
The 15th Finance Commission (FCC), in its interim report for 2020-21, had reduced the share of states in the divisible pool of central taxes by one percentage point to 41%, that could leave Karnataka with a shortage of ₹9,000 to ₹11,000 crore.
Karnataka is expecting slated to see a decrease of 22.5% in the share of funds as its share declines from 4.71% in the 14th Finance Commission to around 3.65% in the new interim report.
T.V. Somanathan, expenditure secretary, Government of India said that dues were being released. He also said that there has been a massive increase in the total transfers to Karnataka from the 15th finance commission as against the 14th finance commision.
He said that the centre had cleared all pending payments in Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA). He added that Karnataka was slated to get an increase of 175% in the 15h finance commission at ₹2,03,215 crore against ₹73,209 crore.
Officials from Karnataka’s Rural Development and Panchayath Raj department said that the dues for current year had been cleared but there were pending dues from earlier years including wage payments and materials. The shortage in MNREGA funds is likely to result in the state falling short of creating 1.5 crore person days in its overall target of 12 crore person days for this year.
The political opposition is looking to further corner the Yediyurappa government over the shortage of funds in the ongoing session of the Karnataka legislature.
The finance ministry also clarified that the recently announced ₹18,600 crore funds for the suburban rail network in Bengaluru is on track and the ₹1 crore released is a token amount for the project and is only a ‘budget technicality. The ₹1 crore released by the centre towards the much delayed and much needed project had attracted sharp criticism from opposition leaders in the state.
Traffic choked Bengaluru has been reeling under inadequate infrastructure and lack of mass public transit options. Slow pace of metro construction and its limited reach has led to shortage of funds for other mass transportation infrastructure.
On rapidly eroding confidence in cooperative banks, Sitharaman said that the centre was amending laws to include these institutions into mainstream banking for greater regulation.
“Such institutions from among the cooperative that use the word bank will now come under the banking regulation act and therefore will have to do all compliances," she said.
The RBI imposed restrictions on Bengaluru-based Guru Raghavendra Sahakara (Cooperative) Bank Niyamitha in January, including limiting customer withdrawal of ₹35,000, sparking fears of a repeat of Punjab and Maharashtra Co-operative Bank Ltd (PMC Bank) in Maharashtra that is embroiled in an over ₹4,355 crore scandal.
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