Bengaluru, Jan 31 (PTI) Ahead of the presentation of the Union Budget in Parliament, Karnataka Chief Minister Siddaramaiah on Friday urged the Centre to recognise the state's contribution and ensure 'just and proportional' resource distribution.

He also slammed the Union government over its 'discriminatory approach' towards Karnataka.

Finance Minister Nirmala Sitharaman will present the Union Budget for 2025-26 in Parliament on February 1.

Stating that Karnataka has already submitted its list of demands to the Centre, Siddaramaiah said, "The discriminatory approach of the Union government towards Karnataka is well known. For our federal system to remain strong, the Centre must adopt a fair, transparent, and unbiased policy towards all states." "Instead of treating states merely as revenue-generating units, the Centre must respond to their financial challenges with fairness and empathy. When it comes to resource allocation, including tax devolution, the Centre must follow scientific and equitable standards," he said in a statement.

Citing that states like Karnataka are at the forefront of development, the chief minister said, the states must receive adequate support.

"The Centre must recognise their contribution and positively respond to their needs, ensuring that resource distribution is just and proportional".

"This will ultimately benefit the entire country, as the progress of these states naturally uplifts others as well. In this regard, our government has been consistently highlighting the repeated injustices faced by Karnataka and urging the Centre to take corrective action," he said.

Listing the key demands in the statement, the CM that the 15th Finance Commission's tenure ends next year, yet the Centre has not released the Rs 5,495 crore special grant and Rs 6,000 crore state-specific grant recommended by the Commission.

"Karnataka has consistently received less than what was recommended, with significant shortfalls in key areas. Between 2021 and 2024, the state received Rs 1,311 crore less for Urban Local Bodies and Rs 775 crore less for Panchayat Raj Institutions. Additionally, in 2022-24, the Centre reduced Rs 826 crore from Health Grants and Rs 340 crore from SDRF allocations," he said.

He urged the Centre to immediately release the pending Rs 3,300 crore along with the full special grants for 2024-25 and 2025-26.

Highlighting that Central grants to states have declined year after year, the CM urged the Union government to either abolish cess and surcharge or merge them into the divisible tax pool to ensure states receive their fair share.

"GST Compensation Cess was introduced to offset revenue losses for states due to GST. However, while the Centre stopped compensation in July 2022, it continues to collect GST cess until 2026. Instead of withholding funds, the Centre should allow states to levy an additional State GST (SGST) to compensate for lost revenue," he said.

Citing significant economic growth and inflation, Siddaramaiah urged that the Constitution must be amended to raise the upper limit of Professional Tax, allowing states to generate additional revenue in line with economic changes.

"The Special Capital Assistance Scheme is a welcome initiative, but its allocation is based on the tax devolution formula, which is already unfair to Karnataka. Since the state receives a lower share of tax devolution, it also gets lower capital assistance. The allocation formula must be revised to ensure a more equitable distribution of funds," he said.

According to him, the Centre funds health insurance under Ayushman Bharat for only 69 lakh families in Karnataka, while under the National Food Security Act (NFSA), it recognises 1.14 crore families. This disparity leaves nearly half of Karnataka's eligible families without central health support.

"Ayushman Bharat must be extended to all NFSA-eligible families to ensure universal health coverage," he said.

Karnataka purchases agricultural produce from farmers under the Minimum Support Price (MSP) scheme, following the rules set by the Union government. However, the CM alleged that the Centre has withheld Rs 2,461.49 crore that it owes to the state.

"As a result, Karnataka has been forced to cover this amount from its own treasury. The Centre must immediately release the pending dues to relieve the financial burden on the state," he said.

He alleged that Karnataka has been consistently denied fair compensation from the National Disaster Response Fund (NDRF) and the State Disaster Response Fund (SDRF).

"The criteria for disaster relief allocation must be revised to better support drought-affected states and ensure compensation is proportionate to actual losses," he said.

He also stressed on Centre's approval for various projects, including those related to railways and the Mekedatu project is crucial for ensuring Bengaluru's drinking water supply and generating 400 MW of hydroelectric power.

To ensure sustainable development and environmental protection, he urged Centre to allocate a Rs10,000 crore special grant for five years for the comprehensive development of the Western Ghats region.

The Centre must consult states while designing Centrally sponsored schemes to ensure clarity on cost-sharing responsibilities.

"Currently, the Centre often allocates lower amounts than the actual project costs, forcing Karnataka to cover the shortfall from its own resources. The Centre must ensure full financial allocation at the time of project approval to reduce the financial burden on states," he said. PTI AMP KH

Just and proportional resource distribution demanded to correct perceived discriminatory fiscal allocations and ensure equitable state funding. Karnataka demands immediate release of withheld and underpaid central grants and MSP dues, revision of tax devolution and capital assistance formulas, merger or abolition of cesses into the divisible tax pool or permission for an additional State GST, constitutional amendment to raise the Professional Tax ceiling, extension of Ayushman Bharat to all NFSA eligible families, revised disaster relief allocation criteria, full funding and state consultation for Centrally Sponsored Schemes, and a special grant for Western Ghats development.