The Karnataka State Road Transport Corporation (KSRTC) is planning to propose a hike in the bus fare by up to 20%. This comes after Congress’s populist Shakti scheme under the “five guarantee” schemes, which offers free bus travel for women in Karnataka, resulted in an enormous loss of Rs 295 crore for the KSRTC over the last three months.
The KSRTC Chairman SR Srinivas underlined the necessity of raising ticket rates to keep the department running. “A board meeting on Friday decided to increase bus ticket prices and bring this to the chief minister’s attention. Bus services are essential. If a bus driver doesn’t show up, a village may lose its bus service for the day. We’ve incurred a loss of Rs 295 crore in the last three months due to the Shakti scheme, Srinivas said adding that if ticket prices are not hiked, the KSRTC will not survive,” Srinivas said. It must be noted here that KSRTC is otherwise a profit-making body, however, the burden of the Shakti scheme has pushed it towards enduring Rs 295 crore losses.
Similarly, Raju Kage, Chairman of North Western Karnataka Road Transport Corporation (NWKRTC), ascribed the Corporation’s losses to the Shakti scheme. “We haven’t increased bus fares in the last 10 years. The department is at a loss, but we’re still managing,” Kage said.
Increasing bus fares is a measure to recuperate some of the lost revenue, but it disproportionately affects those who do not benefit from the free travel scheme and would be unfair to them.
Congress’s five-guarantee scheme drying out Karnataka’s treasury
Freebies function like a communist dream of Utopia, initially, everything appears perfectly fine, but soon, soon reality hits. Initially, the Congress-friendly media and the extended ecosystem showered praises on the state government for its populist “five guarantees”. The ecosystem claimed that the implementation of these freebie-squandering schemes would somehow strike a balance with the state’s economic health and public welfare, however, the reality is far from the tall claims made.
Last week, Karnataka Chief Minister Siddaramaiah’s financial advisor, Basavraj Rayareddy lamented that the state lacks funds for development projects due to guarantee schemes.
“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 managed to get the grant for a lake development project. People want development. But believe me, there is no money. Since I am the financial advisor, I managed to get funds for the lake development project here,” Rayareddy said adding that it has become practically impossible for state MLAs to acquire funding for projects in their constituencies.
State government increasing prices and taxes to sustain freebies
The Congress government has introduced five key guarantee schemes aimed at providing various benefits to the residents. While announcing such schemes political parties claim to alleviate the financial burden on the people, however, these are largely vote-attracting measures.
Notably, Congress’s five guarantee schemes in Karnataka include Gruha Jyothi, as per this, all households receive 200 units of free power; under Gruha Lakshmi, the woman head of every family receives Rs 2,000 monthly assistance; under Anna Bhagya, cash is given to each member of a BPL household instead of an additional 5 kg of rice; under YuvaNidhi, unemployed graduate youth receive Rs 3,000 per month; under Shakti scheme, women are given free travel on public buses. To fund these schemes, CM Siddaramaiah allocated approximately Rs 52,000 crore in February this year, however, the amount apparently, did not prove sufficient to sustain the distribution of freebies.
While the state government allocated 20% of the budget towards providing freebies, in February this year, the CM Siddaramaiah-led government set aside 40% of the Rs.1,20,373 crore meant for welfare programmes. While CM Siddaramaiah claimed that the five guarantees will have a positive economic impact, the impact is more negative than positive.
The state government has had to resort to significant tax hikes, placing an additional financial burden on the people of Karnataka and potentially affecting economic growth.
Since its launch in June last year, the Karnataka Congress government has significantly increased various taxes to sustain its five guarantee schemes and last year, increased the excise duty on Indian Made Foreign Liquor (IMFL) by 20% and on beer from 175% to 185%. The government had also revised guidance values for all immovable properties by 15-20%, increasing the property tax burden on residents.
In February of this year, the Karnataka government increased Stamp Duty costs by 200% to 500% on any documents that do not require registration. Some concerns that increased stamp duty could negatively impact residential and commercial real estate activity in Bengaluru.
There have been proposals to tax fees for the collection of solid waste from houses in Bengaluru, as well as revisions to mining licence fees.
In June this year, the Congress government in Karnataka announced a Rs 3 surge in petrol prices bringing the cost per litre in Bengaluru to Rs 102.84, up from the previous rate of Rs 99.84. Similarly, the price of diesel was increased by Rs 3.02, raising the cost per litre from Rs 85.93 to Rs 88.95.
Besides, petrol and diesel, the state government also announced that it will hike water tariffs saying that “it has become imperative to increase the water tariff as the water board is not able to pay the electricity bill.”
Other than this, the Karnataka Milk Federation (KMF) increased milk prices by Rs 2 last month. After this, a 550 ml packet of Nandini’s toned milk (blue) would cost Rs 24, while a 1,050 ml packet would cost Rs 44. Reports say that this hike was the second in less than a year as in July 2023, the KMF increased rates by Rs 3 per litre.
The desperation of the Congress government is also seen in its alleged diversion of the funds meant for SC/ST communities to implement the five guarantee schemes. It has been alleged that the Congress government diverted around 37% of the funds allocated under the Karnataka Scheduled Castes Sub-Plan and Tribal-Sub-Plan (SCSP-TSP) for the implementation of its guarantee schemes.
Governments often promote welfare schemes and freebies as a means to garner public support, but these initiatives frequently come at a hidden cost. As discussed above, the Congress government’s implementation of five guarantee schemes in Karnataka has led to significant tax hikes to fund these programs. While the people of Karnataka might receive free services or financial aid on the surface, the reality is that the cost is often passed back to them through increased taxes and levies elsewhere. This approach appears to be a form of financial sleight of hand, where the government claims to offer “freebies” while simultaneously placing a heavier tax burden on the populace. Such measures strain household finances and potentially stifle economic growth, as increased taxes can reduce disposable income and consumer spending.
While these schemes claim to provide immediate relief and support to many families, the long-term economic implications and sustainability of such measures remain a concern. These freebies deplete the public treasury, forcing state governments to raise taxes to replenish it. Ultimately, the larger burden is always on the people.
