After rolling out guarantees, Karnataka to hire consultant for ‘innovative capital funding’ in five departments

After rolling out five guarantee schemes that cost the state exchequer around Rs 55,000 crore annually, the Congress-led Karnataka government has decided to rope in a consultant to design ‘innovative capital funding’ strategies for five major departments -- housing, transport, energy, health and education.

The Karnataka State Electronics Development Corporation (KEONICS) has recently invited a Request for Proposal (RFP) to select a consultancy firm to undertake financial assessment and prepare a comprehensive roadmap through innovative capital funding for infrastructure development, ports & inland water transport department.

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The consultant will evaluate ongoing and planned projects, explore non-traditional financing options, and suggest policy and operational measures to strengthen infrastructure funding.

The work will also include stakeholder consultations, budgetary analysis till 2030, and the design of alternative models, such as performance-based grants, Union government incentives, public-private partnerships and other innovative mechanisms.

“Separate assessment reports will be prepared for each sector, followed by an implementation roadmap with timelines, execution scale, risk mitigation and fallback plans”, the tender document reads.

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Five sectors in focus

The consultant’s scope will cover five major areas. In housing, agencies such as Housing Department, Rajiv Gandhi Rural Housing Corporation and Karnataka Housing Board will be included. For transport, it will span Transport Department and state-run transport corporations. The power sector will cover agencies under the Energy Department, including power generation, transmission and distribution companies. In education, the consultant will work with school and higher education departments, while in health, the exercise will involve the Health and Family Welfare Services Department, AYUSH directorates, Drugs Controller and National Health Mission.

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Only the consultants empanelled -- Grant Thornton Bharat LLP, Ernst & Young LLP, Deloitte Touche Tohmatsu India LLP, PwC Pvt Ltd, Primus Partners Pvt Ltd and KPMG Advisory Services Pvt Ltd -- are eligible to bid. This is not the first such exercise. Last year, the state finance department engaged Boston Consulting Group (BCG) to suggest ways to boost revenues, cut expenses and explore asset monetisation.

Rising fiscal stress flagged by CAG

The decision comes at a time when the Comptroller and Auditor General (CAG) has flagged Karnataka’s growing fiscal strain. The state borrowed nearly Rs 63,000 crore in 2023-24, largely to fund guarantee schemes- Gruha Lakshmi, Gruha Jyothi, Anna Bhagya, Shakti and Yuva Nidhi- which together accounted for 15 percent of revenue expenditure. The fiscal deficit widened sharply to Rs 65,522 crore in 2023-24, up from Rs 46,623 crore the previous year, while capital spending on infrastructure fell by over Rs 5,200 crore.

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