The Congress party’s significant victory against the Bharatiya Janata Party (BJP) in Karnataka has emerged as the result of a variety of circumstances, but the freebies that the party provided to the populace may have tipped the scale in its favour.
Every female household head has been guaranteed Rs 2,000 per month by the Congress party, every unemployed diploma holder Rs 1,500 per month, and graduates Rs 3,000 per month. In accordance with the party’s pre-election promises, women would likewise be entitled to free transportation on state-run buses.
Every family will also get free electricity up to 200 units. These incentives come on top of already announced ones like the 500 litres of tax-free diesel per year for deep-sea fishing and the Rs 6,000 lean time allowance for all marine fishermen during the fishing break. Additionally, the party has said that it will create compost/manure facilities in villages with participation from rural women and youth and buy cow dung for Rs 3 per kg.
Some projections suggest that the annual cost of the cash payouts and electricity subsidies would be Rs. 62,000 crores, according to an ET report. The state budget will undoubtedly be impacted by this significant expenditure.
Further, it’s important to know what percentage of the state’s budget the giveaways would make up. Nearly 20% of the state budget is represented by the estimated sum of Rs 62,000 crore. The amount that might be used for significant giveaways is equal to the budget deficit from the preceding fiscal year. The fiscal deficit for 2022–23 was projected in Karnataka’s budget for 2023–24 to be Rs. 60,581 crores or 2.60% of the Gross State Domestic Product (GSDP).
However, according to Randeep Singh Surjewala, the AICC general secretary in charge of Karnataka, these pledges would not have a significant impact because they would not exceed 15% of the state budget. Additionally, he stated that an increase in budget size was anticipated during the following five years.
As per the reports, Karnataka has seen a significant increase in revenue. Budget with a revenue surplus was delivered by the departing BJP administration. Among large states, Karnataka has the greatest growth rate in GST collection. The revenue collection goal for 2022–23 was set at Rs. 72,000 crore, and by the end of January, revenue of Rs. 83,010 crore (excluding GST compensation) had been collected. This was 15% higher than what the budget had projected.
State borrowings, though, have been a source of concern.
According to the most recent budget, Karnataka’s total liabilities increased by more than 3.6 lakh crore over five years, reaching 5.6 lakh crore. At the present rate, it is predicted that Karnataka would borrow another 1.7 lakh crore in three years. By 2026–2027, the state’s overall debt will have increased by 30%, reaching an astounding Rs 7.3 lakh crore. The debt might be mitigated, though, as income is anticipated to increase at a rate of about 30% and reach Rs 2.9 lakh crore by 2026–2027.
At the present pace of increase in borrowings, the state may need Rs 35,090 crore in 2023–24, Rs 38,629 crore in 2024–25, and Rs 47,899 crore in 2025–26, according to remarks made in the winter session of the legislature in December. Additionally, the state will need at least Rs. 50,300 crore just for interest in 2026–2027 assuming the burden of interest also increases by 30% over the next three years while keeping everything else equal.
Even if Karnataka’s economy is predicted to expand in the next years, paying the substantial giveaways, which total Rs 62,000 crore, would still be a problem. The state budget will be influenced by the Congress’ second election pledge to create 10 lakh jobs and fill 2.5 lakh openings in all government ministries, which would increase the state’s salary expenses.
The state’s power industry may not fare well despite the Congress’s pledge to supply free electricity. Karnataka has an energy surplus, but the industry is suffering. As per the reports from February of this year, the five electrical supply firms have lost a total of Rs 14,401 crore, of which Rs 4,581 crore was incurred this year.
The debt accumulation is worsening the issue further. The total liabilities of electricity supply firms was Rs 20,250 crore in February. The failure of supply businesses to make payments to power producing and transmission firms like Karnataka Power Corporation Ltd (KPCL) and Karnataka Power Transmission Corporation Ltd (KPTCL) has had a domino effect. The total outstanding owed to these companies stands at Rs 16,722 crore. And as of December 31, 2022, the combined debt load for all businesses, including KPCL and KPTCL, is a startling Rs 72,114 crore.
Government agencies, panchayat raj and rural development organisations, as well as urban local authorities, are the major defaulters. They still owe Rs. 8,363 crore in debt. In order to pay for welfare programmes like Bhagyajyothi and free electricity for irrigation pump sets, the government itself owes Rs 8,584 crore.
On Saturday, the results of the high-voltage assembly state elections in Karnataka were announced. The Congress emerged as the single-largest party with 135 seats, well past the majority mark, to form a government in the state. The BJP came a distant second with 66 seats, while the JD(S) was third with 19 seats in the 224-seat Legislative Assembly.
Taking responsibility for the debacle as trends showed Bharatiya Janata Party losing the southern state, Karnataka’s outgoing Chief Minister Basavaraj Bommai on Saturday said that there are multiple reasons for the defeat and the party will find out all of them. Bommai who himself won with a whooping margin of 35978 votes from the Shiggaon constituency, said, “I take responsibility for this debacle. There are multiple reasons for this. We will find out all the reasons and strengthen the party once again for Parliament elections.”
He said that the party will take the verdict in its ‘stride’.
