By implementing the 7th Pay Commission in the state will lead to severe challenges in maintaining fiscal. Govt incurred a heavy loss. Implementing 7th pay scale would lead to extra burden on fiscal policy policy of the state. Resulting in deficits range between ₹15,000 crore and ₹20,000 crore for the first year.
At present government has been spending amount of ₹1,59,526 crore for committed expenditure such as salaries, pensions, interest payments, and administrative expenses but the revenue receipt is 61% of expenditure. the total revenue receipts is ₹2,63,178 crore.
Medium Term Fiscal Plan (MTFP) said, ₹80,434 crore is required for salaries, ₹32,355 crore for pensions, ₹40,263 crore for interest payments, and ₹6,474 crore for administrative expenses for the year 2024-25.
The MTFP said, if Karnataka choose old pension scheme in place of new pension scheme it will lead to fiscal disaster for long term. which eventually lead to cutting down finances for welfare and development expenditure. A recent report by the Reserve Bank of India also suggested not switching back to OPS. Switching ops will lead to cumulative burden as high as 4.5 times that of NPS.
Apart from OPS the financial health of Karnataka’s Electricity Supply Companies (Escoms) and Karnataka Power Corporation Ltd. (KPCL) lead concerns towards the State’s fiscal stability, said MTFP.
Loan taken by Escoms and KPCL will further worsen the situation. As of December 2023, loan guarantee paid by by the government has reached ₹36,657 crore. Escoms have been burdened with a loan of amount ₹65,282 crore. Similarly KPCL facing loan of more than ₹31,145 crore.
However it is said government should take steps to improve revenue collection. Which lead to reduction in revenue deficit.
