Karnataka May Plan Budget Cuts To Raise Rs 70,000 Crore For Irrigation Scheme

Karnataka Chief Minister Siddaramaiah (L) and his deputy, DK Shivakumar (File).

Bengaluru:

Karnataka's government may implement a 10 percent budget reduction across Health, Education, and Urban Development departments as Chief Minister Siddaramaiah attempts to generate approximately Rs 75,000 crore over four years for the Upper Krishna irrigation project's third phase.

This phase involves elevating the Almatti dam height from 520 to 524 meters. The increased water levels will submerge around 76,000 acres of nearby land, while approximately 58,000 acres will be required for canal construction and farmer rehabilitation efforts.

Following this week's special cabinet meeting, officials announced that the UKP Phase 3 project requires about 1.33 lakh acres of land in total. Compensation rates were established at Rs 40 lakh per acre for agricultural land, Rs 30 lakh per acre for arid land, and Rs 25 lakh per acre for irrigated land.

VIDEO | A special cabinet session was held in Karnataka to decide the rate of compensation for the acquisition of land in third stage of Upper Krishna Project (UKP) which is aimed to provide irrigation to the drought-prone areas.CM Siddaramaiah (@siddaramaiah) informs, "This… pic.twitter.com/XL1Lf7Cq0q

— Press Trust of India (@PTI_News) September 16, 2025

Reports indicate these compensation rates exceed those proposed by the previous Basavarj Bommai-led administration, which had offered Rs 24 lakh per acre for irrigated land and Rs 20 lakh per acre for arid land. Farmers whose properties were targeted had rejected those rates.

After the meeting, Deputy Chief Minister and Irrigation Minister DK Shivakumar stated, "We have taken a historic decision on the Upper Krishna project... We will ensure land owners are protected (and) we have also decided to give more compensation to the farmers whose lands will be acquired..."

#WATCH | Bengaluru | On Cabinet decisions, Karnataka Deputy CM DK Shivakumar says, "We have taken a historic decision on Upper Krishna Project in the Cabinet meet today. We will ensure that land owners are protected...We have also decided to give more compensation to the farmers… pic.twitter.com/w4n17Cw2GE

— ANI (@ANI) September 16, 2025

Farmers have accepted this latest offer, but with the condition that all acquisitions be completed and compensated within the three-year dam construction timeline. This requirement places significant pressure on the state government to secure the necessary funding for land acquisition.

Labour Minister Santosh Lad acknowledged that "there have to be certain budget cuts." Unconfirmed media reports suggest these cuts could come from the Rs 80,197 crore allocated for development initiatives, excluding funds reserved for 'guarantee' schemes and committed expenditures.

"It is a very important project... we have to fund it," Mr Lad emphasized.

Alternative funding approaches reportedly include increasing prices where feasible or reducing allocations to welfare 'guarantee' schemes that were promised before the 2023 election.

Current reports indicate the immediate revenue target is Rs 15,000 crore, and if departmental budget cuts prove insufficient, the government might consider reductions to 'guarantee' schemes.

Government data shows Rs 51,034 crore is being spent on these welfare schemes this fiscal year.

A final decision regarding funding strategies is expected soon, possibly around the next Budget session.

Neither funding approach will likely be popular, particularly following the BJP-led central government's Goods and Services Tax framework revisions that reduced prices on 'daily use' and aspirational items, presented as a 'Diwali gift' ahead of upcoming Bihar elections.

The funding challenges represent only half of Chief Minister Siddaramaiah's difficulties. Additionally, the Finance Department has ruled out tax increases for the coming year.

This means any government borrowing—with a limit set at Rs 1.16 lakh crore—would push the fiscal deficit beyond the three percent threshold and increase total outstanding liabilities beyond acceptable levels. This situation presents significant challenges for a Congress government already facing criticism from opposition BJP regarding state financial management.

Such criticism has been amplified by a Comptroller and Auditor General of India audit, tabled in the state Assembly last month, which revealed the state borrowed nearly Rs 63,000 crore in 2023/24, with approximately 15 percent allocated to pre-election 'guarantee' schemes.

With input from agencies

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