1 week Ago By Rukma Rathore
According to Karnataka Law and Parliamentary Affairs Minister HK Patil, the decision was reached in light of the considerable escalation in operational costs, particularly the rise in fuel prices and staff expenditures The Indian National Congress stormed to power in Karnataka after the state legislative assembly elections in 2023 promising to deliver better governance, comfortable lifestyle and economic relief for the voters. However, the government has dramatically shifted its stance to regularly burn holes in the pockets of the citizens of the state. The continuous rise in prices of even essential amenities has been implemented to replenish the dwindling funds of the treasury, which has consequently imposed a greater financial strain on the common people.
Now, the Congress-led administration has bestowed a New Year’s gift upon the citizens on 2nd January by deciding to elevate bus fares (city, ordinary, express, and deluxe/premium services) in state-owned transport corporations by 15 per cent in a cabinet meeting. According to Karnataka Law and Parliamentary Affairs Minister HK Patil, the decision was reached in light of the considerable escalation in operational costs, particularly the rise in fuel prices and staff expenditures. The fare hike will take effect from 5th January.
The cabinet has decided to revise the bus fare of the four state transport corporations Karnataka State Road Transport Corporation (KSRTC), Bengaluru Metropolitan Transport Corporation (BMTC), North Western Karnataka Road Transport Corporation (NWKRTC), and Kalyana Karnataka Road Transport Corporation (KKRTC) by 15 per cent,” the minister declared . The move is anticipated to yield a monthly revenue of Rs 74.85 crore and an annual total of approximately Rs 784 crore.
He stated that this is the first fare adjustment for KSRTC, NWKRTC and KKRTC since 2021 and for BMTC since 2015. Patil added that the last fare increase for BMTC occurred on 10th January 2015, when diesel was priced at Rs 60.90 per litre.
Since then, the daily diesel costs for the four corporations have grown from Rs 9.16 crore to Rs 13.2 crore and daily staff salaries have spiked from Rs 12.
95 crore to Rs 18.36 crore. He claimed that the surge in fares was necessary in light of these developments, offering justification for the decision.
Patil confirmed that the ‘Shakti’ initiative, which offers free travel for women, will persist, with the state government allocating Rs 417 crore each month to sustain it. According to sources, the four corporations are struggling with increasing financial losses, having accumulated a total debt of Rs.6,244.
29 crore and cumulative losses reaching Rs.5,209.35 crore.
The Bharatiya Janata Party (BJP) also lashed out at the Congress party, emphasizing that while the government claims bus travel is free for women, this policy will undoubtedly impose a financial burden on men, suggesting that households will not receive any genuine financial relief. Manya @siddaramaiah navare, Your boasting about Five Gaurantee Schemes is only best described by the wise saying- "Empty vessels make the most noise"! All the oratory about these schemes is merely on paper & confined to election speeches! Your lack of planning & failure to..
. pic.twitter.
com/IiPBI3sDoe BJP MLA Dheeraj Muniraj intensified the criticism by asserting that the government was “exploiting” the public through fare increases, particularly in light of its provision of complimentary bus rides for women while simultaneously raising costs for men. The cabinet has resolved to permit the four state-owned transportation utilities to secure a loan of Rs 2000 crore from banks and financial institutions in order to settle their employee provident fund and fuel obligations. The government also opted to extend its guarantee for this debt.
Meanwhile, a decision to lift the Karnataka Industrial Area Development Board’s (KIADB) borrowing ceiling from financial institutions from Rs 500 crore to Rs 5,000 crore was also approved by the Karnataka cabinet on 2nd January. After the cabinet meeting, Patil explained that the decision was reached because the board is purchasing 28,741 acres of land for the construction of 24 industrial districts throughout the state and added that at least Rs 32,380 crore, including Rs 26,505 crore for land acquisition, will be needed to develop these industrial regions. According to an official statement, KIADB has projected that an additional Rs 5,875 crore will be necessary, along with approximately Rs 2,000 crore to fulfill these obligations.
Importantly, the recent declarations reflect the financial mismanagement and deficiency of funds under the rule of Congress. It is superfluous to state that the Congress government’s decisions to increase prices is neither a novel occurrence nor an isolated incident, as this trend has been consistent since they came into power in the state. They were regularly in the spotlight for analogous reasons last year.
Karnataka raised electricity tariffs by Rs 2.89 per unit for consumers exceeding 200 units of usage per month to support the Griha Jyoti scheme, which guarantees free electricity supply for eligible households consuming up to 200 units. The revised rates took effect from 1st July 2024.
This announcement followed the increase in electricity tariffs by 70 paisa per unit that occurred in May. Karnataka announced an increase in petrol and diesel prices in July 2024. The price of petrol rose by Rs 3 per litre, elevating the cost from Rs 99.
84 to Rs 102.84. Similarly, diesel prices increased by Rs 3.
02 per litre, resulting in a new price of Rs 88.95. The Petroleum Dealers Association attributed the development to the state government’s adjustment of the sales tax on petroleum products.
According to the notification, the sales tax on petrol was raised from 25.92 per cent to 29.84 per cent, while the tax on diesel was increased from 14.
3 per cent to 18.4 per cent. The considerable escalation in sales tax directly influenced the retail prices of petrol and diesel throughout the state.
The finance department decided to hike the sales tax with the objective of boosting state revenue. However, the move had potential extensive implications for various sectors, such as transportation and goods distribution, which could eventually lead to higher expenses for consumers. Last November, the Karnataka government hospitals linked to the Bangalore Medical College and Research Institute (BMCRI) implemented an increase in ward charges and fees for various services, which encompassed outpatient department (OPD) facilities.
The Karnataka government announced a circular that presented the updated fee structure. Key modifications included the outpatient department (OPD) registration fees, which increased from Rs 10 to Rs 20, and inpatient admission fees, raised from Rs 25 to Rs 50. Blood test charges were risen significantly, from Rs 70 to Rs 120, while ward fees adjusted to Rs 50 from Rs 25.
Notably, the cost for hospital waste management experienced the most substantial hike, increasing from Rs 10 to Rs 50. The price for a single-bed special ward was also set at Rs 2,000 per day from the earlier charge of Rs 750. The rate for a twin-occupancy special ward was elevated from Rs 750 to Rs 1,000.
Interestingly, Karnataka Health Minister Dinesh Gundu Rao stated that the increase in user fees at hospitals affiliated with the Bangalore Medical College and Research Institute (BMCRI) is considered “minimal,” ensuring that it will not impose a significant burden on the public. On the other hand, patients seeking treatment at the state-operated Victoria, Minto, Vani Vilas, PMSSY Super Speciality, and Trauma and Emergency Care hospitals, which are associated with Bangalore Medical College and Research Institute (BMCRI) were already subjected to increased user fees for various medical services, including treatments, surgeries, blood tests and scans. As of 1st November, the fees for treatments, surgeries, blood tests, scans, and other services had been increased by 20%.
The rise in prices even extended to alcoholic beverages, with an increase in domestic liquor prices last year followed by plans to raise excise duties on beer. A draft notification was issued by the government to invite objections concerning the proposed rise in excise duty on beer, in August. The government collected responses from various stakeholders, including beer manufacturers, liquor shop owners, and consumers.
After careful consideration of the feedback received, the government chose to implement the increase. As a result, beer prices were projected to experience a significant rise, marking the fourth increase in a mere year and a half. According to sources, the Additional Excise Duty (AED) was raised from 175% to 185% in July 2023, which caused an increase of Rs 10 to Rs 15 for a 650 ml bottle of beer.
Consequently, manufacturers raised their prices by at least Rs 10 per bottle to offset the escalating production costs. As of 1st February 2024, the AED will be further expanded from 185% to 195%, which will lead to an additional 10% rise in prices. The Beer Association of India (BAI) also urged Karnataka Chief Minister Siddaramaiah to withdraw the draft notification, citing potential difficulties for beer makers as the proposed notification suggested a price increase of 10-20% on beers with higher alcohol content.
Noatbly, liquor is most expensive in Karnataka compared to all other south Indian states. Moreover, the water tariff is also expected to rise by Rs 2 to Rs 3 in Karnataka should the government approve the Forest and Environment Department’s proposal to impose a green cess on water bills aimed at safeguarding the catchment areas in the Western Ghats. Minister Eshwar B Khandre of the Forest, Environment and Ecology Department requested that the forest and environment department present a proposal for the green cess on water bills within a week, after which it will be submitted to the Chief Minister for review, in November of last year.
Citizens and opposition parties, including the BJP, among others have consistently challenged these decisions and criticized the Congress government, but to no avail. The Congress party and the state of Karnataka are currently grappling with the severe consequences of the five guarantees it promised during assembly elections. The five guarantees promised by the Congress in Karnataka were Gruha Lakshmi (Rs 2,000 to every woman head of a family), Gruha Jyoti (200 units electricity free to every household), Shakthi (free travel for women across Karnataka in state buses), Anna Bhagya (10 kg rice to every member of Below Poverty Line-BPL families every month) and Yuva Nidhi (Rs 3,000 dole to unemployed graduates and Rs 1,500 to unemployed diploma holders for 2 years in the 18-25 age group).
Faced with the challenge of meeting the five guarantees, the Karnataka government, even hired the Boston Consulting Group (BCG) as a consultant last year which even resulted in a conflict within the party. BCG which was paid 9.5 crore fee for 6 months was assigned the responsibility of developing strategies aimed at enhancing revenue and addressing inefficiencies in revenue collection.
The five guarantees cost the exchequer a staggering Rs 36,000 crore in 2023-24. Chief Minister Siddaramaiah had allocated around Rs 52,000 crore for the five schemes last year, which benefit roughly 5.10 crore people.
Leaders within Congress have exposed how the party’s freebies politics is adversely affecting the state’s coffers . Sharanabasappa Darshanapur, the Karnataka Minister of Small-Scale Industries and Public Enterprises, acknowledged in June of the previous year that the guarantee schemes introduced by the party would have a direct impact on the state’s infrastructure development. He conveyed that infrastructure development in the state would face certain challenges during the first year of the Congress government.
He asserted that these challenges would arise as a result of the guarantee schemes implemented by the Siddaramaiah administration. He further noted that the financial implications of these guarantee schemes would place a burden of approximately Rs 40,000 crore to Rs 50,000 crore on the state’s finances. “We need more than ₹50,000 crores annually for the implementation of our five guarantees.
This may affect the development works to some extent,” the minister added. Basavaraj Rayareddy, who serves as the financial advisor to Karnataka Chief Minister Siddaramaiah, also mentioned that the state is facing a shortage of funds for development initiatives due to guarantee schemes, last July. This financial predicament emerged as substantial sums of money must be allocated for the Congress party’s welfare programs.
“Many MLAs are demanding funds for development works in their constituencies, however, there is no money with the government. We are spending approximately Rs 65,000 crore on guarantee schemes. Since I am the financial advisor, I somehow manage to get the grant for lake development project.
People want development. But believe me, there is absolutely no money. Since I am the financial advisor, I managed to get funds for the lake development project here,” he highlighted.
Karnataka’s MLAs are encountering considerable difficulties in obtaining funding for projects at their constituencies. “I am fully cognizant of the financial strain we are under,” the lawmaker from Yelburga remarked, “Internally, I know the financial stress.” Meanwhile, Prime Minister Narendra Modi attacked the Congress party after its president, Mallikarjun Kharge, advised the party’s state branches to focus solely on promises that are “fiscally achievable.
” He took to X and wrote, “The Congress Party is realising the hard way that making unreal promises is easy but implementing them properly is tough or impossible. Campaign after campaign they promise things to the people, which they also know they will never be able to deliver. Now, they stand badly exposed in front of the people.
Look at any state where Congress is currently in power, Himachal Pradesh, Karnataka and Telangana, their development path and financial health are worsening.” Following the detrimental impact of their freebie policies on the state’s budget and financial reserves, Karnataka Congress administration is expected to incur borrowings of Rs 4,000 crore weekly during the fourth quarter of the financial year 2024-2025, reported The Hindu. The Reserve Bank of India has released its indicative borrowing calendar for the upcoming quarter, revealing that the state is scheduled to undertake a market borrowing of Rs 48,000 crore within the 12-week timeframe from January to March.
A weekly schedule for the auctions planned for the January-March quarter has been established, detailing the participation of Karnataka and other States/UTs (Union Territories) that have confirmed their involvement and provided tentative amounts. The Reserve Bank of India (RBI) announced that it will carry out the auctions in a manner that minimizes disruption, taking into consideration prevailing market conditions and other pertinent factors, while ensuring an equitable distribution of borrowings throughout the quarter. The RBI retains the authority to adjust the auction dates and amounts in consultation with the state government, as mentioned in the release.
State governments source market borrowings from the public, which are managed by the RBI through the issuance of marketable securities. Chief Minister Siddaramaiah, who also serves as the finance minister, has projected that the government will borrow Rs 1,05,246 crore, in the state budget for 2024-2025. He is expected to present his 15th Budget in March.
Karnataka’s borrowings have seen a significant increase in recent years, primarily due to the rollout of social welfare schemes, especially the five guarantees initiated by the Congress government. The state’s borrowings were recorded at Rs 44,549 crore during the fiscal year 2022-2023, which rose to Rs 85,818 crore in 2023-2024. According to projections, the government is expected to invest nearly Rs 60,000 crore in the implementation of these guarantee schemes.
Basavaraj Rayareddy, a Congress MLA and economic adviser to the Chief Minister, has indicated that the government is likely to borrow Rs 85,000 crore in the current fiscal year (2024-25). He further elaborated that approximately 50% of these borrowings would be directed towards repaying interest and principal on loans taken in the past. Karnataka, akin to other states, has as progressively turned to the open market for its borrowings.
Its total outstanding liabilities, which encompass public debt, public account liabilities, and off-budget borrowings, have seen an increase over the past few years. As reported by PRS Legislative Research, it is projected that by the end of the 2024-25 fiscal year, the state’s outstanding liabilities will reach 24% of the Gross State Domestic Product (GSDP), surpassing the revised estimate of 23% of GSDP for the 2023-24 fiscal year. The government appears to have failed to learn any lessons and intends to allocate funds to support its policy of providing free benefits, ultimately jeopardizing the long-term economic stability of the state.
It would indeed be unfair to target a specific party or state government, as other parties, such as the Aam Aadmi Party (AAP), are similarly engaged in these practices. In reality, no political party is exempt from the influence of these freebie schemes, which might entice voters and contribute to electoral success. Nevertheless, such measures are fundamentally parasitic, which lead to considerable economic damage and only deliver short-time benefits to the citizens.
Unfortunately, as effectively illustrated by Congress, no political party is willing to alter their approach regarding freebies owing to their narrow vision and prioritizing immediate electoral rewards. Clearly, a state has a responsibility to support its citizens, however, there exists a delicate balance between welfare and handouts that political parties have frequently overlooked. Most importantly, such decisions end up affecting the common citizens, as demonstrated in Karnataka.
The government imposes greater financial burdens on taxpayers to sustain such schemes, aiming to facilitate electoral success. The harsh reality is that the law-abiding and tax-paying voter bears the brunt of these policies as politicians focus solely on obtaining votes by any means necessary..
