BENGALURU: Karnataka’s Finance Department has cautioned the government against announcing or taking up new development projects without first ensuring funds are available, amid mounting financial commitments and a growing backlog of unpaid bills. The warning has taken on new significance, with pending bills in four key departments alone estimated at Rs 36,136 crore.
A Finance Department note dated September 17 highlighted pressure on the state’s finances and advised the government to assess its actual financial capacity before committing to additional projects. The department’s concerns come as several departments seek additional allocations. At the same time, large sums are already required to clear bills for works that have been approved or are under execution.
The biggest concern is the accumulated liability from existing projects. According to the Finance Department’s assessment, pending expenditure on already approved works is estimated to be more than Rs 2 lakh crore. The government will therefore have to mobilise substantial resources even to meet its existing commitments before taking on fresh financial liabilities.
The Rs 36,136-crore pending bill burden in the Public Works Department (PWD), Water Resources Department, Minor Irrigation Department and Rural Development and Panchayat Raj Department has emerged as a major concern. The backlog reflects payments due for works already undertaken or approved, putting additional pressure on the government’s cash flow and its ability to finance new announcements.
The issue has also become visible at the field level. Contractors in Udupi district recently claimed that bills amounting to Rs 1,205.99 crore for completed works under various government departments and corporations remained unpaid. The dues included Rs 189.86 crore under PWD, Rs 322.42 crore under the Varahi Project Division, and Rs 4.92 crore under RDPR, along with substantial amounts under Minor Irrigation and other departments.
The Finance Department has also pointed to the state’s fiscal position for 2026-27. The revenue deficit is estimated at Rs 22,957 crore, while the fiscal deficit is projected at around 2.9 per cent of GSDP, close to the statutory ceiling. Budget analysis based on the state’s 2026-27 estimates puts the fiscal deficit at Rs 97,448 crore.
The state’s debt position is another factor behind the caution. The government’s outstanding debt is estimated to be around 24.94 per cent of GSDP, leaving limited headroom under the fiscal responsibility framework. The Finance Department has indicated that much of the borrowing capacity available for the current financial year has already been committed to budgetary requirements.
Fresh project approvals have compounded the financial pressure. More than Rs 5,000 crore worth of projects have reportedly received approval during the first six months of 2026-27, including works under SE-1. However, the Finance Department has noted that additional funding sources for some of these commitments have not yet been clearly identified.
Several departments, including Water Resources, Energy, Commerce and Industries, and Urban Development and Transport, have also sought additional grants. With sizeable proposals for additional funding pending before the Finance Department, officials have expressed concern over how further commitments can be accommodated without affecting existing obligations.
The warning is particularly relevant to proposals for new infrastructure and rural development works. The Finance Department’s position is that announcing a project and subsequently struggling to release funds could increase the backlog of unpaid bills and delay payments for works already completed.
The drought situation could further complicate the financial picture. Karnataka is already facing rainfall deficiencies in several regions, and the government is considering additional expenditure for drought relief and related measures. The number of drought-hit taluks has also increased, adding to the state’s potential financial obligations.
Another possible pressure point is the subsidy burden on irrigation pump sets. Officials have estimated that an additional Rs 4,000 crore to Rs 5,000 crore may be required, depending on the drought’s impact and related measures. This could further narrow the fiscal space available for new schemes.
Chief Minister D.K. Shivakumar, responding to the Finance Department’s caution, said there was nothing wrong with officials advising the government to exercise caution in the state’s financial interest. He said those in government knew how to manage the situation and would take appropriate decisions.
Shivakumar also questioned criticism over the government’s financial management and said those raising concerns should also ensure that Karnataka receives its due share from the Centre.
The Finance Department’s warning therefore puts the government in a financial balancing act: clearing the Rs 36,136 crore in pending bills across four major departments, meeting commitments on already sanctioned projects worth more than Rs 2 lakh crore, addressing drought-related expenditure, and accommodating departmental demands for additional grants, while considering new development schemes.
