Karnataka CM Siddaramaiah submits demands to Finance Minister ahead of Budget, calls for "fair" approach from Centre

Bengaluru (Karnataka) [India], January 31 : Karnataka Chief Minister Siddaramaiah has submitted Karnataka's list of demands to the Union Government ahead of the Budget presentation for the financial year 2025-26 tomorrow.
She also criticised the BJP-led Centre for the "discriminatory approach" towards Karnataka, and said the Centre should adopt a "fair, transparent, and unbiased policy" for country's federal system.
"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," CM Siddaramaiah said.
He said that in particular, states like Karnataka, which are at the forefront of development, must receive adequate support. The Karnataka CM said that the Centre must recognise their contributions 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. With the Union Finance Minister set to present the 2025-26 Budget on February 1, I have already submitted Karnataka's list of demands to the Union Government," he said.
He shared the key demands with the people of Karnataka in a press release.
He said 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 cut Rs 826 crore from Health Grants and Rs 340 crore from SDRF allocations. The Centre must immediately release the pending Rs 3,300 crore along with the full special grants for 2024-25 and 2025-26," he said.
He said that the Centre collects cess and surcharge but does not share them with states. "In 2010-11, cess and surcharge made up 8.1 percent of total tax revenue, but by 2024-25, this has increased to 14 percent, reducing Karnataka's share of tax devolution. Meanwhile, central grants to states have also declined year after year. The Centre must either abolish cess & surcharge or merge them into the divisible tax pool to ensure states receive their fair share," he said.
He said that the 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," the CM said.
He said that the Professional Tax has not been revised since 1985, despite significant economic growth and inflation. 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.
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.
Karnataka purchases agricultural produce from farmers under the Minimum Support Price (MSP) scheme, following the rules set by the Union Government. However, 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 that the Union Government's honorarium for Anganwadi and ASHA workers, as well as social security pensions, remains extremely low and has not been revised for years. This has put additional financial pressure on the Karnataka Government, which is covering most of the costs to ensure fair wages for these workers.
"Anganwadi workers receive Rs 10,000 per month, but the Centre contributes only Rs 2,700. ASHA workers receive Rs 7,000 per month, with the Centre's share being just Rs 2,000. Anganwadi cooks and helpers receive Rs 3,100 from the state, while the Centre contributes only Rs 600. To ease this burden, the Centre must increase its share to Rs 5,000 per month for Anganwadi and ASHA workers and at least Rs 5,000 for cooks and helpers," he said.
He said that the Under Pradhan Mantri Awas Yojana (Urban), the Centre currently provides Rs 1.5 lakh per house, while Karnataka contributes Rs 1.8 lakh. However, construction costs have increased significantly, making this funding inadequate. The Centre must raise its share to at least Rs 5 lakh per house to support affordable housing.
"Similarly, under Pradhan Mantri Awas Yojana (Rural), the Centre contributes only Rs 72,000 per house, while the state provides Rs 42,000. Given rising costs, this is insufficient. The Centre must increase its share to at least Rs 3 lakh per house to ensure rural families get adequate housing support," he said.
He said that in 2023, 223 out of 236 taluks in Karnataka suffered severe drought, leading to crop loss in 48 lakh hectares and economic damage of Rs 35,162 crore. Despite Karnataka requesting Rs 18,171 crore in relief, the Centre released only Rs 3,454 crore from the NDRF. Similarly, in 2024, heavy rains and flooding, especially in Bengaluru, caused severe damage, but the NDMA has yet to release substantial assistance.
"Karnataka has been consistently denied fair compensation from the National Disaster Response Fund (NDRF) and the State Disaster Response Fund (SDRF). The NDRF system must be reformed to ensure that relief is provided fairly, transparently, and without delay. The criteria for disaster relief allocation must be revised to better support drought-affected states and ensure compensation is proportionate to actual losses," Siddaramaiah said.
He further said that the Railway projects fall under the Union List as per the Seventh Schedule of the Constitution, yet their implementation places a heavy financial burden on the state government. Currently, Karnataka bears the full cost of land acquisition and 50 percent of construction expenses for railway projects. This cost-sharing model must be changed, with the Centre covering 50 percent of land acquisition costs and 100 percent of construction costs to ensure faster project completion and equitable financial responsibility.
He said that the Detailed Project Report (DPR) for the Kalasa Nala Diversion Project in the Mahadayi river basin, costing Rs 995.30 crore, was approved in March 2023.
"However, land acquisition for the 26,925-hectare forest area has been delayed due to objections from the Goa Government. The project is currently under review by the National Board for Wildlife (NBWL) and the National Tiger Conservation Authority (NTCA). Since the Supreme Court has clarified that Karnataka can seek clearance from the Centre, the Union Government must grant approval without further delay," he demanded.
He said that for the Banduri Nala Diversion Project, Karnataka submitted a proposal in August 2024 for acquiring 28 hectares of forest land. With all state-level processes now completed, the Union Government must immediately approve the project to ensure timely implementation.
He said that the Krishna Water Disputes Tribunal awarded Karnataka 173 TMC of water in 2010.
"Out of this, 130 TMC is allocated for the Rs 51,148 crore Krishna Upper Bank (Stage III) Project, which aims to provide irrigation to seven drought-prone districts of North Karnataka. However, citing objections from other states pending before the Supreme Court, the Centre has refused to publish the tribunal's verdict in the official Gazette. The Union Government must immediately file an application before the Supreme Court to enable the publication of the tribunal's decision, allowing Karnataka to propose this project as a National Project," he further said.
CM Siddaramaiah said that declaring the Upper Bhadra Project as a National Project will provide critical water resources to drought-prone regions of Chikkamagaluru, Chitradurga, Tumakuru, and Davangere. The Public Investment Committee has already approved the proposal, and the Centre must include this declaration in the upcoming budget.
Siddaramaiah said that the Mekedatu Project is crucial for ensuring Bengaluru's drinking water supply and generating 400 MW of hydroelectric power. The Union Government must approve this project without further delay to support Karnataka's growing water and energy needs.
He said that due to its unique geography and ecological sensitivity, the Western Ghats region in Karnataka faces multiple challenges.
"Recognised as an environmentally sensitive zone, this region has restricted economic activity while increasing the state's financial burden for conservation and disaster management. To ensure sustainable development and environmental protection, the Union Government must allocate a Rs 10,000 crore special grant for five years for the comprehensive development of the Malnad region," he added.
Siddaramaiah said that the Kalyana Karnataka region (formerly Hyderabad-Karnataka) continues to face severe regional disparities in education, healthcare, and infrastructure. To support its development, the Karnataka Government invests Rs 5,000 crore annually. The Union Government must allocate an additional Rs 5,000 crore in the budget to accelerate the region's progress.
He said that over the past three years, the Centre has consistently reduced grants to Karnataka. "Since our government took office, 23 departments implementing 61 Centrally Sponsored Schemes have not received the required funds for six months, delaying crucial projects," he said.
There is a need to completely restructure Centrally Sponsored Schemes (CSS). "The Centre must consult states while designing these 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 added.
He said that the funding for Centrally Sponsored Schemes such as Mission Vatsalya (Integrated Child Protection Scheme), Samagra Shiksha, Fast Track Special Courts for POCSO and rape cases, and the Integrated Sample Survey for estimating milk, meat, and wool production is currently disbursed on a reimbursement basis. This places an undue financial strain on Karnataka. The Centre must switch to an advance payment system instead of reimbursement to ensure smoother implementation.
"Under the National Social Assistance Programme (NSAP), the Centre currently provides pensions and financial assistance to only 14.41 lakh beneficiaries in Karnataka, while the state government supports an additional 68.66 lakh beneficiaries under its own schemes. This means the Centre covers only 17 percent of Karnataka's pensioners. The Union Government must increase its support to cover at least 50 percent of beneficiaries under the NSAP," he added.
"In 2023-24, Karnataka spent Rs 10,544 crore on social security pensions, of which the Centre's contribution was only Rs 471 crore--just 4 percent of the total expenditure. The Central allocation for these schemes has not been revised in over a decade. This must be corrected in the upcoming financial year to ensure fair support for Karnataka's social welfare programs," he added.