The Karnataka government’s proposed ‘green cess’ has run into political difficulties even before a draft has been tabled. This proposal is supposed to levy Rs 2 to Rs 3 on water bills in Karnataka cities that use water from rivers originating in the Western Ghats.
However, the Opposition has accused the government of furtively trying to bolster its finances, which are reportedly depleting fast because of Congress’s guarantee schemes in the state.
While these welfare programs are for the upliftment of the state’s underprivileged, the Opposition in the state have repeatedly raised concerns about their financial sustainability, especially as they account for a significant portion of the state’s annual budget.
And the green cess, according to the Opposition, is to generate revenue.
This is not the first cess introduced by the state government since coming to power. In its first budget after being elected, the Congress government announced a 20% hike in excise duty on Indian Made Foreign Liquor (IMFL) and a 10% increase on beer prices in the July 2023 state budget. Apart from alcoholic beverages, a 3% hike in transport cess was announced on newly registered commercial transport vehicles, including cabs and auto rickshaws.
In October 2023, the state government announced a 25-30% increase in the guidance value of properties. It also increased the sales tax on petrol and diesel by Rs 3 per litre in June 2024.
Recently, in August 2024, the Siddaramaiah-led government was keen on levying higher excise duty on ‘strong beer’. If the taxation proposal moves through, this will be the third hike of beer prices in Karnataka in just over a year.
Karnataka’s financial challenges also led the state to hire Boston Consulting Group (BCG) for guidance on improving revenue generation and plugging financial leaks earlier this year. This move, however, had triggered a political controversy. The BJP criticised the consultancy’s Rs 9.5 crore fee, questioning why the government would need external help given Chief Minister Siddaramaiah’s self-identified expertise in economics. The opposition also pointed out the high cost of the consultancy as a misuse of taxpayer money while the state faced budgetary pressure.
Despite these efforts, the state is said to be facing a budgetary shortfall, prompting discussions about new taxes like the green cess.
However, on November 13, Chief Minister Siddaramaiah denied all allegations of shortage of funds for development activities. “There is no fund shortage for developmental works in the state. BJP lies to people all the time. They are busy spreading lies about the state’s economic conditions, citing the implementation of the five guarantee schemes. If we were short of funds, how were we able to take up these developmental works?” he questioned.
He asserted that the state’s financial position remains stable. With a state budget size of Rs 3.71 lakh crore, he clarified, “While Rs 58,000 crore is allocated for the implementation of the five guarantee schemes, the remaining funds are being directed toward development projects.”
Siddaramaiah, who also holds the finance portfolio, explained that the government has effectively balanced its commitments and development needs. Having presented 14 budgets over his 40-year political career, he reassured the public that the financial framework is robust enough to support both the guarantees and infrastructural growth.