Karnataka govt ropes in Boston Consulting Group to boost revenue amid poll guarantee schemes

Karnataka govt ropes in Boston Consulting Group to boost revenue amid guarantee schemes

The Karnataka government has roped in Boston Consulting Group (BCG) as a consultant to boost revenue and plug leakages.

The Congress-led state government is under pressure to mobilise funds for the implementation of five guarantees. The five guarantees benefit 5.10 crore people in the state, costing the exchequer Rs 36,000 crore in 2023-24. Chief Minister Siddaramaiah allocated Rs 52,009 crore for the schemes this fiscal year.

Also, read: In Karnataka, lacklustre Congress performance casts a shadow on guarantee schemes

Sources said BCG, in its draft report, suggested the government focus on identifying new revenue sources in departments such as mining, and asset monetisation. For instance, one of the suggestions is to monetise around 25,000 acres of land near Bengaluru.

A source told Moneycontrol: “We are considering creating planned satellite towns in and around Bengaluru, in places such as Bidadi, Anekal, Hoskote, Devanahalli, and Doddaballapur. When we create infrastructure, housing, industrial layouts, and IT corridors, then it will increase the value of land and some amount of land can be monetised to raise funds for development.”

"The better expenditure management in big spending departments like irrigation, energy, Public Works Department, Rural Development and Panchayat Raj Department (RDPR) and also raising funds through innovative methods are being  explored,"  he added.

The government is hoping to generate an additional Rs 5,000 crore per fiscal year. Additional chief secretary (finance) LK Atheeq told Moneycontrol that BCG has been appointed as a consultant to 'unlock' budget potential. “But these are just ideas. The goal is to raise more resources, better manage expenditures, and plug leakages in revenue collections without burdening the citizens. For instance, more tax compliance in GST and property tax, etc will help to generate more revenue. The additional revenue will be used for the development of satellite towns around Bengaluru and 10 municipal corporations across the state with a focus on North Karnataka.”

He said these suggestions are on the table and still in the discussion stage. “Some viable suggestions may be incorporated in the next budget.”

Moneycontrol on March 26, 2024, carried a report "After five poll guarantees, Karnataka to hire private consultant to increase tax collection & plug leakages."

Also, read: After five poll guarantees, Karnataka to hire private consultant to increase tax collection & plug leakages

This is not the first time BCG has worked with the state government. BCG is also the knowledge partner for the global investors' meet, ‘Invest Karnataka Summit,’ which will be held in February 2025.

In February 2024, BCG gave a presentation on the design of the proposed KHIR (Knowledge, Healthcare, Innovation, and Research) City near Bengaluru to the State Major Industries and Infrastructure Development Minister MB Patil.

Also, read: Karnataka likely to set up SPV for Knowledge, Healthcare, Innovation and Research city

In 2020, the then BJP government also roped in BCG to help the state attract investments and extended the contract in 2021 for a year. BCG was the knowledge partner for the Global Investors' Meet 2022.

The consultant will also help enhance both tax and non-tax revenues, trim expenses, explore innovative funding sources, and foster public-private partnerships (PPPs).

The firm will identify initiatives to increase compliance and broaden the taxpayer base to enhance Karnataka's tax revenues, with a specific focus on commercial taxes, road tax, excise duties, and land registration fees/stamp duties.

To generate additional revenue to fund guarantees, the state government increased fuel prices by Rs 3 per liter, guidance value of properties by 15-30 percent, imposed an additional excise duty (AED) on Indian-made liquor (IML) by 20 percent on all slabs and AED on beer from 175 percent to 185 percent, imposed a 3 percent additional cess on newly-registered transport vehicles, introduced a lifetime tax on EVs (electric vehicles) above Rs 25 lakh, and intensified tax collection.

Also, read: Karnataka: Petrol, diesel prices rise by Rs 3 as state government increases sales tax on fuel

The five poll guarantees implemented by the Congress government are free travel for women across the state in non-AC state-run buses; 200 units of free power per month; Rs 2,000 per month for each female head of the family; 10 kg of food grains (rice, ragi, jowar, millet) per month to BPL (below poverty line) families; Rs 3,000 per month for two years to unemployed graduates; and Rs 1,500 per month for two years to unemployed diploma holders.

Siddaramaiah's revenue-deficit budget for 2024-25 — his 15th budget — has a total outlay of Rs 3,71,383 crore. With the deficit set at Rs 27,354 crore, this is probably the first time annual borrowings have exceeded Rs 1 lakh crore in a fiscal year.

Also, read: Congress party's poll guarantees: A tightrope walk awaits new Karnataka government