BENGALURU: Karnataka Revenue Minister Krishna Byre Gowda on Saturday urged Union Finance Minister Nirmala Sitharaman to take steps to restore the fiscal balance by ensuring adequate allocation of grants for the state in the 2026-27 budget that will be presented on February 1.
Participating in a pre-budget meeting chaired by Sitharaman in New Delhi, Gowda raised the issue of the shift from demand-driven MGNREGA to allocation-based VB-G RAM G, as it has reduced effective employment days.
In order to continue to provide livelihood security to 13 crore person-days, Karnataka would require approximately Rs 2,000 crore, which is fiscally unsustainable, as the new cost-sharing (60:40) has increased the state’s burden, Gowda claimed. Gowda requested reconsideration of the scheme design, restoration of demand-driven employment, and adequate uncapped Central funding.
In a letter thanking Sitharaman for providing the opportunity, Gowda highlighted that despite Karnataka being a major contributor to the national growth, it was facing shrinking fiscal space amid GST changes, rising social commitments, climate shocks, and rapid urbanisation.
Post-GST rate rationalisation, Karnataka’s GST growth has fallen from 12% to 5%, resulting in a Rs 5,000 crore shortfall this year and Rs 9,000 crore annually, Gowda added.
While the Centre has offset its loss through a cess on pan masala and excise on tobacco, states lack similar flexibility, he pointed out.
Gowda requested a robust revenue protection mechanism for states and to ensure full compensation for revenue loss, similar to GST Compensation Cess.
On the sharing of excise duty on tobacco and cess on pan masala, Gowda raised the issue that despite the states bearing costs on public health, enforcement, and regulation, cess proceeds remain outside the divisible pool. He requested a 50:50 sharing of excise duty on tobacco and cess on pan masala to restore fiscal equity and cooperative federalism.
He claimed that against the Central release of Rs 11,786 crore, the state has released Rs 24,598 crore, a Rs 13,004 crore in advance over and above its share to avoid disruption of Jal Jeevan Mission works.
He said that the MSP procurement is inadequate for many crops facing gluts and perishability. Karnataka proposes PDPS for 8 crops (maize, soybean, mango, chilli, onion, tomato, turmeric, and ginger) and requests an additional allocation of Rs 796 crore under PM-AASHA for timely PDPS rollout in 2026-27, he said.
He also urged that the Central contribution to Anganwadi, ASHA, and cooks/helpers be revised to Rs 8,000 from Rs 5,000 per month.
He requested to declare Upper Bhadra Project as a national project and to release Rs 5,300 crore Central assistance as announced in 2023-24 budget.
He urged that the 15th Financial Commission grants, Rs 4,044 shortfall, and disaster relief releases should be expedited that include special grants of Rs 5,495 crore and state-specific grants of Rs 6,000 crore.
Gowda further sought Central support for the Kalyana Karnataka region, as it requires additional grants beyond the state’s 5,000 crore annual allocation to bridge HDI gaps.