Mohandas Pai says Karnataka got 'raw deal' from 14th & 15th Finance Commissions; stresses their autonomy

BENGALURU: Businessman and government critic Mohandas Pai stated that Karnataka had received a raw deal from the 14th and 15th Finance Commissions (FCs), but emphasised the panels constitutional autonomy, independent of the UPA or NDA governments in Delhi. Distribution is by the Finance Commission appointed under the Constitution and not any govt in Delhi, whether UPA or NDA. Yes, Karnataka got a raw deal under the 14th and 15th FCs -- the 14th FC was set up by the UPA government, and 15th FC by the NDA government. But FC is autonomous, please dont get carried away by fake propaganda, Pai said. Pai was responding to an X post by Kiran Kodlady, who urged scrutiny of Bengalurus infrastructure issues alongside questions about central tax devolution fairness. Kodlady highlighted: If anyone raises questions about Bengalurus infrastructure, join them, theyre valid concerns. At the same time, make them ask: Is the distribution shown fair? Isnt the formula used by the Finance Commission skewed? How does a city like Bengaluru -- which contributes nearly Rs4 lakh crore in direct and indirect taxes to the Delhi exchequer -- receive the same allocation as northern cities that dont even generate 10% of that? Why do northern states focus on securing new trains to send their youth to Bengaluru instead of creating jobs locally? If they arent willing to ask these questions alongside you, its fair to consider their stance dishonest and purely political. In response, former additional chief secretary of finance LK Atheeq agreed on the FCs autonomy but argued for rational critique. He noted that the 14th FC allocated 4.713% of central taxes to Karnataka, which was reduced to 3.647% by the 15th FC -- a 25% drop (1.066 percentage points). Atheeq questioned claims of a raw deal under the 14th FC, stating the reduction stemmed from two factors: A 45% weight on per capita income distance from the highest GSDP state in the 15th FC (up from 50% in the 14th), where lower distance results in a smaller tax share. The 14th FCs higher weight was moderated by Karnatakas lower GSDP estimates under the old methodology. Upward revisions to Karnatakas GSDP are due to new methods and high income from zero-GST software and IT service exports. Atheeq said the 15th FC recognized the need for moderation but recommended Rs 11,560 crore in state-specific grants, which the Finance ministry rejected. He proposed reducing the income distance weight to at most 35%, and reallocating it to tax effort criteria to better reward revenue-generating states without major impacts on others. Atheeq reminded that Karnataka, with 5% of Indias population, contributes 9% to the national GDP.