Guarantees: Karnataka govt buys time for fiscally-prudent model

A two-hour-long meeting Chief Minister Siddaramaiah held with his ministers and top bureaucrats was inconclusive on Wednesday as the government was unable to finalise a fiscally-prudent option to implement its flagship five guarantees.

The government postponed the Cabinet meeting scheduled for Thursday by a day, giving time for officers to crunch numbers and come up with the best possible implementation model given the fiscal challenges involved.

Siddaramaiah said the final decision on the modalities would be taken in the Cabinet meeting on Friday. "Officials gave us a detailed presentation outlining the costs involved," he said.

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His deputy D K Shivakumar added that the officials were asked to rework on some of the options presented based on the feedback from ministers.

Apparently, some officials expressed concerns over the impact of the guarantees on the state's finances.

Officials now have the daunting task of coming up with a viable solution. The cost of implementing five guarantees is anywhere between Rs 50,000 crore and up to Rs 1 lakh crore depending on the modalities, highly-placed sources said.

Having presented a record 13 budgets, Siddaramaiah always takes pride in his fiscal prudence. Officials must ensure that the five guarantees do not push the state into further debt.

In the 2023-24 budget presented earlier this year by then CM Basavaraj Bommai, the state's liabilities were 24.20% and fiscal deficit was 2.6% of the GSDP, precariously close to the permissible limits.

The government's options to mobilise resources are limited: fuel, stamps & registration and excise. Since fuel prices are already high, the government cannot tap this.

Officials are also mulling shutting some projects started by the previous governments.

It is likely that the government will prioritise BPL beneficiaries. "What's wrong with that? The government is meant to serve the poor," RDPR Minister Priyank Kharge said before Wednesday's meeting. He also said the guarantees will have parameters to identify beneficiaries.

Siddaramaiah has publicly stated that the guarantees could cost Rs 50,000 crore. According to one option tabled in Wednesday's meeting, the cost can be almost halved to Rs 26,692 crore.

For example, under Gruha Lakshmi (Rs 2,000 per month to women), only those households headed by women (with no male head) can be considered for the benefit. This works out to 27 lakh women.

For Shakti (free bus travel for women), officials asked the Cabinet to use discretion on whether the facility should cover ordinary buses or even express buses.