Karnataka Chief Minister Siddaramaiah met Union Finance Minister Nirmala Sitharaman on Tuesday to seek the Centre’s backing for a pro-growth approach in tax devolution among states by the 16th Finance Commission.
During the meeting, Siddaramaiah informed Sitharaman about Karnataka’s substantial losses under the 15th Finance Commission award. He subsequently demanded a larger allocation for the state from the central tax pool under the upcoming 16th Finance Commission, which begins its term on 1 April 2026, news agency PTI reported.
“I met the Union Finance Minister and informed her that Karnataka faced a cumulative loss of over Rs 80,000 crore due to the reduction in the state’s share of tax devolution by the 15th Finance Commission,” Siddaramaiah told reporters after the meeting.
The Chief Minister also submitted an additional memorandum, urging the Centre to rectify a persistent imbalance in fiscal transfers from the Centre to the states.
Under the 15th Finance Commission, Karnataka’s share in tax devolution decreased from 4.713 per cent to 3.647 per cent — a reduction of over 23 per cent.
Karnataka was also denied Rs 11,495 crore in special grants, resulting in a total loss of Rs 80,000 crore during the award period.
According to PTI, the Chief Minister attributed this decline primarily to the over-reliance on the income-distance criterion, which received 45 per cent weightage under the 15th Finance Commission.
The Karnataka government has requested the 16th Finance Commission to reduce the weightage for income-distance by 20 percentage points and reallocate it to fiscal contribution — the state’s share in national GDP. The state has also proposed discontinuing Revenue Deficit Grants in their current format, arguing they contradict fiscal discipline principles outlined in the FRBM framework. Instead, Karnataka suggested redistributing the same amount — 1.92 per cent of Gross Union Receipts under the 15th Finance Commission — among all states using the horizontal devolution formula, PTI reported.
Chief Minister Siddaramaiah highlighted the developmental challenges facing the Bengaluru, Kalyana Karnataka, and Malenadu regions, emphasising that fair and pro-growth devolution would accelerate the state’s growth trajectory. The Chief Minister clarified that Karnataka’s proposals were not a request for special treatment, but would improve overall national resource mobilisation and foster cooperative and competitive federalism.
The meeting concluded with Siddaramaiah requesting the Finance Minister to include these proposals in the Union government’s memorandum to the 16th Finance Commission, arguing that growth-friendly devolution would empower all states to contribute effectively to India’s development journey.
The Finance Commission provides recommendations on the financial relationship between the Centre and the states.
The 16th Finance Commission, established in December 2023 under the chairmanship of Arvind Panagariya, is expected to submit its recommendations by 31 October 2025. These recommendations will apply for a five-year period beginning 1 April 2026, according to PTI.
The 15th Finance Commission, led by N K Singh, had suggested that states receive 41 per cent of the Centre’s divisible tax pool for the five-year period from April 2021 to March 2026.
(With inputs from PTI)