The Karnataka State Contractors' Association on Tuesday, 29 September 2026, wrote to Chief Minister D.K. Shivakumar demanding the release of approximately ₹38,000 crore in pending payments, expressing sharp dissatisfaction over the prolonged delay and reminding him of a two-month commitment he had made on 30 June 2026. The association says the deadline has now lapsed without resolution.

The Broken Deadline

Association President R. Manjunath recalled that Chief Minister Shivakumar had personally assured contractors on 30 June 2026 that all outstanding dues would be cleared within two months. That window has elapsed, and the association says the issue has remained unresolved for nearly three years. The letter urges Shivakumar to intervene immediately and convene an emergency meeting to address contractor grievances.

Key Demands Raised

Beyond the immediate release of pending bills, the association has put forward several structural demands. It has called for full transparency in the fund-release process across government departments and sought an end to the practice of issuing special Letters of Credit (LOCs). Contractors have also demanded the release of the 8 per cent difference arising from GST implications on existing contracts. Additionally, the association has urged the government to give preference to local Karnataka-based contractors in the award of public works, and to stop encouraging contractors from other states when issuing state government contracts.

The PWD Transparency Claim and ED Shadow

In a politically significant aside, the association acknowledged that payments related to the Public Works Department (PWD), headed by Minister Satish Jarkiholi, were being handled with relative transparency — even as Jarkiholi and his associates have come under scrutiny from the Enforcement Directorate (ED). According to an ED statement, searches were conducted at 21 premises across Bengaluru, Belagavi, Gokak, and Kolkata in September in connection with a FEMA investigation. The agency reportedly seized ₹3.3 crore in cash, ₹15 lakh in foreign currency, and several documents linked to alleged undisclosed overseas investments, cross-border business links, and suspected financial irregularities.

Broader Context

The pending dues crisis is not new to Karnataka. Critics argue that successive state governments have struggled to clear contractor backlogs, particularly after infrastructure spending surged post-pandemic. The fact that ₹38,000 crore remains unpaid signals either a severe fiscal squeeze or systemic inefficiency in the state's payment pipeline — or both. This comes amid the Congress-led Karnataka government facing mounting pressure over its finances, including the cost of flagship guarantee schemes. For contractors — many of them small and mid-sized firms — the delayed payments translate into liquidity stress, stalled projects, and difficulty servicing loans taken to fund government work.

What Happens Next

The association has urged Chief Minister Shivakumar to schedule an emergency meeting at the earliest. Whether the government responds before the situation escalates into a full work stoppage by contractors will be closely watched, particularly given the ED investigations now hovering over a key PWD minister.