Punjab Finance Minister Cheema seeks special economic package from Centre

Punjab Finance Minister Harpal Singh Cheema on Saturday urged the Centre to extend immediate fiscal assistance and announce a special economic package for Punjab, pointing out that the state endured a difficult 2025 marked by border tensions and the worst floods in decades.

During a pre-Budget meeting with Union Finance Minister Nirmala Sitharaman here, Cheema submitted a detailed memorandum laying out Punjab’s key financial requirements and policy demands for the 2026-27 Union Budget.

He said the state, being the country’s first line of defence, suffered severe economic disruption due to prolonged security tensions along the international border, followed by a devastating monsoon disaster that was officially declared a calamity of severe nature by the home ministry.

Explaining the scale of devastation, the Punjab Finance Minister said the floods impacted more than 2,300 villages and nearly 20,000 families across the state.

Cheema informed Sitharaman that comprehensive ground-level assessments have pegged the total damage at Rs 12,905 crore.

“To manage rehabilitation and reconstruction arising from such extraordinary circumstances, Punjab requires fiscal flexibility,” he said, formally requesting permission for a one-time additional borrowing limit of 1 per cent of GSDP for 2025-26 under provisions of the Fiscal Responsibility and Budget Management Act applicable during natural disasters and national security emergencies.

Raising concerns related to national security, the Punjab Finance Minister sought special Central assistance of Rs 1,000 crore for the modernisation of the police force, strengthening emergency response systems, and deploying advanced anti-drone technology to effectively counter cross-border threats and narcotics trafficking.

“As a border state bearing a disproportionate security burden, this support should be seen as cooperative federalism in action, not as a concession,” he was quoted as saying in a state government statement.

Turning to agriculture and rural infrastructure, Cheema flagged the issue of withheld Rural Development Fund, urging the Centre to immediately release the pending amount of Rs 7,757 crore calculated up to June 2025.

“These funds are critical for maintaining rural roads and infrastructure,” he said.

Stressing the urgent need to shift away from water-intensive crops, Cheema proposed a special budgetary allocation for paddy diversification, arguing that the current incentive is inadequate.

He sought an increase in incentive to Rs 15,000 per acre to drive real behavioural change among farmers and safeguard groundwater resources.

On the issue of GST reforms, the Punjab minister pointed out that the state has suffered a severe and continuing revenue shock following the implementation of GST 2.0.

“Punjab is facing an annual revenue loss of nearly Rs 6,000 crore, which amounts to around 44 per cent of its own tax revenue,” he noted.

Cheema strongly pressed for a predictable GST stabilisation or compensation mechanism for states facing such structural revenue erosion, stating that the fiscal sustainability of states cannot be compromised.

He also expressed strong opposition to the proposed changes to the MGNREGA framework, arguing that the new model dilutes the employment guarantee and transfers a significant financial burden to the states.

Cheema also called for the restoration of the original demand-driven structure and funding pattern of the scheme.