Karnataka unlikely to scrap 'deemed expenditure' clause

The Congress’ poll promise of removing a contentious legal provision that allows “diversion” of funds meant for SC/ST welfare may not be fulfilled because doing so would make things unwieldy.

For long now, SC/ST lawmakers across party lines have frowned upon Section 7(d) of the Karnataka Scheduled Castes Sub-Plan and Tribal Sub-Plan (Planning, Allocation and Utilisation of Financial Resources) Act.

The Act requires the government to spend 24.1% of its total budget on SC/ST welfare - 17.15% for SCs and 6.95% for STs.

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But successive governments have used Section 7(d) to ‘divert’ funds towards infrastructure projects, arguing that even SC/STs use roads built using this money.

Section 7(D) deals with ‘deemed expenditure’ for Scheduled Castes Sub-Plan and Tribal Sub-Plan (SCSP-TSP). When it comes to infrastructure works, a portion of the project cost shall be ‘deemed’ to have been provided for the sub-plans; in other words, spent on SC/ST welfare.

Since 2018, a whopping Rs 8,000 crore has been given to departments such as irrigation, urban development and rural development & panchayat raj (RDPR) under the ‘deemed expenditure’ clause.

“The problem with removing Section 7(d) is that it’ll drain up projects,” one minister familiar with the Act said. “In irrigation, for example, out of Rs 10,000 crore, if you must spend Rs 2,410 crore (24.1%) on SC/ST welfare alone, it becomes difficult to execute.”

A senior IAS officer pointed out that Section 7(d) deals with “non-divisible” infrastructure works. “When it comes to irrigation canals, reservoirs, court buildings, hospital buildings...beneficiaries aren’t divisible to show how many SC/STs are benefiting. These are indivisible assets that don’t carry individual benefits,” the officer explained.

Some big budget departments such as irrigation need Section 7(d) so that they can comply with the mandate of the Act.

But departments such as RDPR have argued that SCSP-TSP funds can be used to build roads in localities dominated by SC/STs. Even with the Jal Jeevan Mission, the RDPR department has used SCSP-TSP funds to provide tap water connections to SC/ST households, therefore complying with the law.

Instead of scrapping Section 7(d), the government is likely to put a cap on the amount of funds that can be considered as ‘deemed expenditure’. “This thinking is there. The social welfare department can take over funds of other departments that can’t fully spend 24.1% as required,” the officer said.