Karnataka govt does a tightrope walk as revenues dry up

The lockdown may have been the best bet to contain the spread of Covid-19, but the collateral damage on the Karnataka’s economy has been huge.

Published: 29th April 2020 06:04 AM  |   Last Updated: 29th April 2020 06:04 AM   |  A+A-

Men wearing face masks walk past a graffiti during the lockdown | Shekhar yadav

Express News Service

BENGALURU: The lockdown may have been the best bet to contain the spread of Covid-19, but the collateral damage on the Karnataka’s economy has been huge. In the last four weeks, the state lost around Rs 10,000 crore in revenue, which includes collections from Goods and Services Tax (GST) as well as the state’s own sources.

The state may be staring at empty coffers even as it has started easing restrictions outside containment areas to bring the economy back on track in a phased manner. Those privy to the state’s financial situation termed it as “very grim”. In fact, Chief Minister B S Yediyurappa had, on several occasions in the recent past, admitted that the state’s financial position is not good and that they are considering various measures to shore up revenues.

For now, the government is only focused on fighting the Covid-19 pandemic and managing the administrative machinery. All other works have been put on hold. Only urgent and essential works will be taken up, that too after the state overcomes the health crisis.

“In one month, we could have expected around Rs 10,000 crore revenue, which includes the GST collections and the state’s own source of revenue. But that has not come due to the unforeseen situation,” B T Manohar, member, GST Advisory Council to the State Government, told TNIE. “We are expecting final instalments of GST reimbursements for 2019-20. It may come to around Rs 4,500 crore.” 

This apart, the state is also expecting a Rs 5,495 crore special grant recommended by the 15th Finance Commission. “The CM has discussed it with the Union Finance Minister and we may get it soon,” sources in the government said. 

While funds from the Centre are yet to come, the state’s revenue sources too have completely dried up. “Tax collection has completely stopped and the state is now carrying on by optimising resources available with different departments. Once the situation improves, funds will be redirected to those departments,” said a senior government functionary.

Fuel sales tax to see 40% dip this month

motor vehicle tax and registration of properties are among the major sources of revenue for the State Government. The sub-registrar offices have opened from Tuesday, but it may take time for operations to normalise, while revenue from fuel sales is likely to be much less than expected for the month. According to estimates, the State Government gets around Rs 1,200 to 1,300 crore per month from sales tax on fuel. This month, it is unlikely to get even 40 per cent of that due to restrictions on movement of vehicles within and outside Karnataka. State excise is the other major revenue source.

In the budget, the government had fixed the target at Rs 22,700 crore for 2020-21, which works out to around Rs 1,891 crore a month. Not even a fraction of that can be expected as liquor shops continue to remain shut since a month and are unlikely to open any time soon.

While the State Government is looking at measures like auctioning of 12,000 corner sites in Bangalore Development Authority (BDA) jurisdiction, with a potential to generate around Rs 30,000 crore, and schemes like Akrama-Sakrama for revenue generation, the process may take time. Sources in the government said that for now, they are hoping to get assistance from the Central Government before considering the option of external borrowing to keep the system going till the economy bounces back.


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