How does the Karnataka government aim to deliver the five freebies, promised ahead of the polls, without affecting the exchequer? Possibly by jacking up petrol prices and industrial power tariff as also by raising property tax rates.

Sources in the know told businessline that Chief Minister Siddaramaiah, who has retained the Finance portfolio, has a three-pronged strategy to mop up resources for the expected ₹65,000- crore annual hit , from the fulfilment of the promises. 

Three pronged strategy

As part of this strategy, petrol prices may be hiked by ₹5-7 a litre in the coming days and industrial power tariffs will be stepped up. The government will also be looking at increasing property taxes and raising the guidance value — the minimum price at which a property transaction is registered — in all localities.

Although it did not confirm these moves, the Congress said it “could be possible”.

Party spokesperson BL Shankar told businessline , “Resource mobilisation is, of course, a challenge, in the process of implementation of the guarantees. In that case, if the State has to mobilise on its own, it will look at petrol price and property tax hike, as they are outside the purview of GST. While this is an option, the government will also focus on savings, readjustment of spending across departments, and strict collection of taxes.”

While the government is considering all possible avenues, clarity will emerge only when the CM presents the Budget and provides details on the provisions being made.

Although it will be challenging to implement the guarantees and also fund developmental programmes at the same time, Siddaramaiah’s financial chops and experience can be have to be relied on for a solution and trusted on, he added.

Industry worried

Industry bodies in Karnataka are worried about the price hikes. The industrial power tariff was hiked from ₹7 to ₹9 per unit, from May 15.

Expressing concern, KN Narasimhamurthy , President, Karnataka Small Scale Industries Association ( KASSIA), said: “The increase in power tariff will be a major blow to the sector and electricity bills will shoot north of 15 per cent. This will increase the pressure on the sector which is already grappling with continued after-effects of the war, global slowdown, and high inflation.”

He also feared that continued pressure and changes may lead to the shutdown of some small-scale units.

Reflecting on the effects of probable hikes on the real estate sector, Mallanna Sasalu, COO, Provident Housing, told businessline, “To be fair, the guidance value has not been revised for long. During the pandemic year, the industry suffered and only in the past six months has it seen a price surge of 6-8 per cent in some pockets. The government has to be careful in increasing the guidance value and must not take a blanket approach. It can be done in pockets where prices have gone up.”

Still, the move could be a little premature, and the government can rather wait for another year, let the sector recover completely, and make the changes, he added.

Better collection

Political analyst Sandeep Shastri said, “There is no such thing as a free lunch, and the government will have to mop up resources. They have already frozen all the allocations made by the previous government. Going forward, the focus would be on new levies, but for now efficiently collecting existing taxes is preferred.”

He further noted that in the past few years, tax collection in the State did not reach a very high percentage, and given Siddaramaiah’s ability and track record, his strategy should help mop up resources.