Karnataka: Siddaramaiah stops release of funds for previous government's projects

Congress ran its election campaign in the state on the anti-corruption plank, accusing former chief minister Basavaraj Bommai of running a 40 per cent commission government.

Days after taking charge, the Karnataka government led by Siddaramaiah ordered to stop the release of funds for projects/works initiated by the previous BJP-led government.

In a circular dated May 22, Ekroop Caur, Secretary, Finance (Budget and Resources) stated, “As per the directive of the Chief Minister, all releases/payments related to projects initiated by the previous government across departments, including boards and corporations, are to be stopped”. The direction has also ordered to stop all works which have not yet started.

Kaur told Moneycontrol that this will apply to the projects, which have not started/work orders have not been issued. “This will not affect ongoing infrastructure projects like Metro rail. This circular applies to pending projects or those work orders not issued,” Caur clarified.

A senior bureaucrat on condition of anonymity said, “The new government is expected to conduct a thorough review of major projects, and a clear picture will emerge in the coming days.”

He said infrastructure projects such as the Bengaluru Metro and Bengaluru suburban rail, which operate under a Special Purpose Vehicle (SPV) joint venture model, may not be affected as they involve contributions from both the central and state governments.

“The funding pattern for these projects is 20 percent each from the Karnataka government and the Government of India, with the remaining 60 percent sourced through external funding. However, projects initiated or proposed in the months leading up to the elections could potentially face implications from the funding halt,” he said.

MG Devasahayam, a retired IAS officer, said: "Congress government's decision to halt funding for projects initiated by the previous BJP government was expected."

He said the Congress party received a significant mandate in Karnataka on an anti-corruption plank and had pledged to investigate projects, particularly regarding allegations of 40% commission charges against the previous government. However, Devasahayam believes that infrastructure projects like the Metro rail will not be affected by this order.

This move is also aimed at generating funds for the implementation of the Congress's five poll-guarantees, which is estimated to cost the exchequer around Rs 50,000-60,000 crore per year. By halting funding for certain projects initiated by the previous government, the plan is to redirect resources towards fulfilling the promises made during the elections.

Siddaramaiah took over as CM on May 20 after Congress won 135 out of 224 seats in the legislative assembly.

Congress ran its election campaign in the state on the anti-corruption plank, accusing former chief minister Basavaraj Bommai of running a 40 percent commission government.

Hours after assuming office, Siddaramaiah gave in-principle approval for all five guarantees made in Congress' manifesto ahead of the assembly election, to be implemented. The poll guarantees played a significant role in securing their victory in Karnataka.

The party's guarantees comprise initiatives such as providing 200 units of free electricity to all households (Gruha Jyothi), offering Rs 2,000 monthly to each female head of the family (Gruha Lakshmi), supplying 10 kg of food grains (rice, ragi, jowar, millet) to each member of Below Poverty Line (BPL) families (Anna Bhagya), granting Rs 3,000 monthly for two years to unemployed graduates and Rs 1,500 monthly for two years to unemployed diploma holders (Yuvanidhi), and enabling free travel for women across the state in regular KSRTC/BMTC buses.