THIRUVANANTHAPURAM: The new devolution formula announced in the Union Budget presented by Finance Minister Nirmala Sitharaman on Sunday raised Kerala's tax share from the present 1.925 per cent to 2.382 per cent.

This means Kerala's share from union taxes will increase by over Rs 10,000 crore for the next five financial years.

As per the revised formula, Kerala will get an increase of over Rs 11,000 crore in its share from union taxes and duties. In 2026-27, Kerala will get Rs 36,355.39 crore as against the previous year's 24526.84 crore.     

The state-wise distribution of net proceeds from union taxes and duties is made as per the recommendation of the Finance Commission.

Kerala's share from this divisible pool saw a steady decline from 3.82 per cent in 10th Finance commission to 2.5 per cent in 14th FC and 1.952 per cent in the 15th Finance Commission, accounting for a 50 per cent decline. 

Certain criteria like income distance and demographic factors in the Terms of Reference for the 15th FC resulted in the low share for Kerala from the divisible pool. Kerala and other southern states which had attained population control turned out to be losers on this count. 

In its presentation before the 16th FC, Kerala had raised the disparity in horizontal devolution.   

Rare earth corridor

In the Union Budget 2026-27, the Finance Minister announced the setting up of rare earth corridors in Kerala, Tamil Nadu, Andhra Pradesh and Odisha.

Another announcement was to establish a turtle train along key nesting sites in coastal Kerala.

Kerala's major demands at the pre-budget consultation were not considered.