Despite Rs 18,000 Loan, Karnataka May Face Shortfalls | Bangalore News

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BENGALURU: Although the central government has authorized compensation of Rs 18,100 crores in loan for the 2021-22 fiscal year, Karnataka may continue to face huge funding shortfalls for the second year in a row due to increased costs of Covid-19 treatment caused by the second wave of infections and rising planned costs.
Chief Minister BS Yediyurappa called a meeting financial department officials on Monday to discuss ways to increase revenues and cut planned spending – most notably wages and benefits for civil servants.
Sources say the finance department is likely to push the CM to further lift restrictions and allow economic activity to grow at a high pace, ensuring a steady stream of income.
“In addition to assessing the financial situation of the state, the CM will also ask officials for a comprehensive plan to ensure adequate resources to treat Covid,” said a senior official from the Chief Minister’s office.
On Saturday GST Council approved the offer to grant Karnataka a loan of Rs 18,109 crores to offset the loss of income incurred due to isolation. The loan will likely be disbursed under last year’s scheme, which entailed a special borrowing window for states where loans can be repaid with proceeds levied on sin goods such as tobacco and luxury cars from April 2022. The state received Rs 12,407 crore. in 18 installments according to the scheme 2020-21
The fresh loan will also be disbursed in tranches from the last week of this month or early next month. “Credit compensation will help us fight the pandemic,” said Basawaraj Bommai, Minister of Justice and Parliamentary Affairs who represents Karnataka on the GST Council. He said that in addition to the loan, the state expects the Center to pay Rs 11,000 crore pending last year’s GST compensation.
However, Treasury officials have expressed concern that reported spending remains unchanged while tax revenues continue to plummet.
Officials say civil servants’ salaries are the biggest burden, with monthly payments of around 5.2 million. They say the government spends Rs 38,626 crores on salaries, Rs 23,413 crores for retirement and an additional Rs 10,000 crores on salaries for external employees.
On the other hand, commercial tax collection fell sharply from a record Rs 10,300 crores in March to just Rs 4,304 crores in April.
“Tax collection is expected to be even lower in May and June due to the lockdown,” the official said.
BT Manohar, a member of the Karnataka State GST Advisory Committee, said the best way is to open all sectors to business, not cut corners. “We need to find a balance between controlling Covid and a quick economic recovery. This can be achieved by ensuring adequate treatments for Covid and wider vaccination coverage, while opening up all sectors with strict Covid protocols, ”Manohar said.



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