Why Karnataka Is Ready To Pay Rs 9.5 Crore For 6 Months To BCG: Revenue Boost Deal, BJP-Cong War & Guarantees

The Congress-led Karnataka government’s move to rope in consultancy firm Boston Consulting Group (BCG) to oversee and help boost the revenue has started a political controversy. While the Congress seems divided over the move, it has hit back at the Opposition Bharatiya Janata Party (BJP), saying the Centre, too, has hired the same firm for its 2047 Vision Document.

The CM Siddaramaiah-led government has hired BCG as its finance consultant to boost revenue and identify financial leakages amid implementation of its pre-poll guarantees. The primary role of the agency is to identify new revenue streams to fund the guarantees, new development works and bolster the economy. The state has already allotted over Rs 50,000 crore for implementation of the guarantees.

The BCG has quoted 9.5 crore as its fee for the initial six months.

HANDING OVER FINANCES TO EAST INDIA COMPANY: BJP

The move is being criticised by the BJP, with state president BY Vijayendra calling it outrageous and akin to handing state finances to East India Company.

BJP leader R Ashoka wrote on X: “What is the need of the Boston Consulting Group when a self-proclaimed economist like @siddaramaiah is the Chief Minister of the state? Not sure whether it will boost the revenues of the State Government, but it will definitely boost the revenues of private consultancy firm at the cost of Karnataka’s tax payers.”

MODI, BSY, BOMMAI DID IT TOO: CONGRESS’S COUNTER

Hitting back at the BJP, Karnataka Health Minister Dinesh Gundurao slammed the BJP, pointing out that PM Narendra Modi-led government, too, has hired the firm for the 2047 vision document.

He further pointed out that former Chief Ministers from BJP – BS Yediyurappa and Bommai – had also roped in BCG during their tenure.

BCG’S EARLIER VENTURES WITH GOVTS

Apart from the Centre’s Vision Document, in 2023, BCG was given a contract earlier by the Ministry of Electronics and Information Technology to restructure the National Informatics Center, which offers the government essential digital services, such as network infrastructure, data centers, software applications, and cloud services.

The Goa government has enlisted BCG to prepare the vision document ‘Viksit Goa @ 2047’. Last year, the Tamil Nadu government selected BCG to “develop an overall strategy and roadmap for Tamil Nadu to realise the vision of a $1-trillion economy”.

In 2020, then Karnataka government had appointed BCG to help the state attract investments for 12 months. The contract was worth Rs 12 crore.

In 2020, Invest India – a public-private partnership to promote investments – had roped in major consulting firms to devise a recovery strategy for the Covid-19 crisis. The initiative was set up under the Ministry of Commerce & Industry’s Department for Promotion of Industry and Internal Trade in 2009. BCG was one of the seven firms.

In 2020, BCG advised the Andhra Pradesh government on decentralised development across all regions.

In 2017, NITI Aayog announced plans to hire consultancy firms, including BCG, for time-bound projects.

CONGRESS DIVIDED: LEADERS QUESTION MOVE, ONE RETRACTS

Meanwhile, Congress appeared divided on the issue.

Congress leader Praveen Chakravarty, chairman of Professionals’ Congress & Data Analytics, wrote on X, on June 20: “If one wins elections by outsourcing core political functions to external fee charging transactional consultants, then one also governs by outsourcing core policy functions to similar consultants!”

Chakravarty on June 21 apologised for his remarks. “I posted my pvt opinion on the broader culture of outsourcing core political & policy functions to outside consultants with no ‘skin in the game’. It’s an issue that is debated widely in research circles & my comment was purely academic”.

“In retrospect, I should have been much more sensitive about the context. It was absolutely not intended as a personal criticism of any, let alone my own party’s. I have spoken with & expressed my apologies for causing inadvertent harm to the leadership in Karnataka,” he added.

Tamil Nadu Congress leader and party spokesperson R Mohan Kumaramangalam reacted on X: “A data thief turned data fudger/and self-declared consultant who manufactured data to mislead the congress leadership in 2019 and has since been masquerading as a politician is calling out real politicians for using the services of capable consultants. Hilarious”.

THE GUARANTEES

The Congress built its election campaign on five guarantee schemes: 200 units of free power to all households (Gruha Jyoti), free public bus rides for women (Shakti), Rs 2,000 per month for women heads of households (Gruha Lakshmi), 10 kg of free rice (Anna Bhagya), and Rs 1,500-3,000 for unemployed graduates (Yuva Nidhi). These schemes helped the party win 135 out of 224 seats in the 2023 assembly polls, costing the government Rs 50,000-60,000 crore in the current fiscal year.

MONEY SPENT & IMPACT

News18 had recently reported that according to the latest records, the government spent Rs 5,754.6 crore on the Anna Bhagya scheme to provide an additional 5 kg of rice per family at Rs 34 per kg. Siddaramaiah stated that the Gruha Jyoti scheme benefited 1.67 crore people, with an allocation of Rs 7,436 crore. The Shakti scheme facilitated over 2.01 billion bus rides, costing Rs 4,857.95 crore. The Gruha Lakshmi scheme has provided a total of Rs 20,293.49 crore to 1.2 crore women so far. Under the Yuva Nidhi scheme, over 1.53 lakh youngsters registered, and 29,587 beneficiaries received Rs 1,500-3,000 through direct bank transfers (DBT).

THE HIKES THAT FOLLOWED

In July 2023, the Congress government raised liquor prices, including beer, as part of the 2023-24 budget. This measure aimed to help the Excise Department achieve a revenue collection target of ₹36,000 crore for the fiscal year. Siddaramaiah proposed a 20% increase in the duty on Indian Made Foreign Liquor (IMFL) across all categories, with the duty on beer rising from 175% to 185%. This was said to be the first move toward funding the guarantee schemes.

In February, the state government implemented a substantial increase of 200-500 per cent in stamp duty charges for documents that do not require registration, such as partition deeds, addition deeds, affidavits, cancellation deeds, and the reconstruction and demerger of companies.

In June, the chief minister chaired a review meeting with the departments of commercial taxes, stamps and registration, excise, transport, and mines and geology to assess tax collection for the first two months of the 2024-25 fiscal year.

The state government recently increased petrol prices by Rs 3 and diesel prices by Rs 3.50 per litre. The Karnataka government increased the VAT on petrol to 29.84% and diesel to 18.44%. Siddaramaiah defended the move, stating that the state’s taxes on fuel remain lower than those in most South Indian states or similar economy states like Madhya Pradesh and Maharashtra. The Congress government called it a necessary move to fund five people-centric guarantees and state development.

The BJP, however, launched a statewide protest against this hike, vowing to continue until the Congress government rolls back its decision. It accused the Congress of cheating the public to win elections and then taking money from the people once in power.