Punjab's Comprehensive Union Budget Wishlist: Fiscal Relief and Security Upgrades
Ahead of the Union Budget 2026-27, scheduled for presentation in Parliament on Sunday, the Punjab government has submitted a detailed memorandum outlining significant financial demands. The state, grappling with what it describes as a "double whammy" of prolonged India-Pakistan border tensions followed by devastating floods in 2025, is seeking a special fiscal package to aid recovery efforts.
Border Tensions and Flood Devastation
Punjab Finance Minister Harpal Singh Cheema emphasized the state's strategic role as India's first line of defense. Heightened border tensions severely disrupted economic activity across large parts of Punjab even before unprecedented monsoon floods wreaked havoc later in 2025. The Ministry of Home Affairs declared these floods a calamity of severe nature, affecting over 2,300 villages and nearly 20,000 families.
Ground-level assessments peg the total damage at Rs 12,905 crore. To manage rehabilitation and reconstruction, Cheema has sought permission for a one-time additional borrowing limit of 1% of Gross State Domestic Product (GSDP) for 2025-26 under FRBM Act provisions applicable during natural disasters and national security emergencies. The state also demands flexibility in using State Disaster Response Fund (SDRF) balances, including exemption from interest liability.
Security Modernization: A National Responsibility
Citing growing cross-border threats including drone-based smuggling and narcotics trafficking, the Punjab government has requested special central assistance of Rs 1,000 crore specifically for police modernization. This proposed grant would fund upgrades to security infrastructure, strengthen emergency response systems, and deploy advanced anti-drone technology.
Cheema argued that the security burden borne by Punjab should be treated as a national responsibility rather than a discretionary favor. The Finance Minister stressed that the Union Budget must reflect the spirit of cooperative federalism and respond to the exceptional circumstances faced by the border state.
Pending Dues and Rural Development
The state has demanded immediate release of Rs 7,757 crore in pending Rural Development Fund (RDF) dues, stating these funds are critical for maintaining rural roads and infrastructure. Additionally, to address alarming groundwater depletion, Cheema has pushed for enhanced incentives for paddy diversification.
The proposal includes increasing the incentive from Rs 7,500 to Rs 15,000 per acre, asserting that only substantial financial support can encourage farmers to shift from wheat-paddy monoculture. The state has also sought higher interest subvention on cooperative crop loans (from 1.5% to 3%) and restoration of NABARD refinance to Rural Cooperative Banks to at least 40% at concessional rates.
GST Compensation and Revenue Concerns
Cheema highlighted that Punjab experienced severe and continuing revenue shock following GST 2.0 reforms. According to the Finance Minister, the state faces an annual revenue loss of nearly Rs 6,000 crore, representing approximately 44% of its own tax revenue. He pressed for a predictable GST compensation or stabilization mechanism to protect states from structural revenue erosion.
Opposition to Central Policy Changes
The Finance Minister strongly opposed proposed changes to the MGNREGA framework, warning that the new model weakens employment guarantees and shifts greater financial burden onto states. Punjab has demanded restoration of the original demand-driven structure and funding pattern, rejecting the transition to the "Viksit Bharat Guarantee for Rozgar and Ajeevika Mission."
Cheema also pointed out that Punjab's National Health Mission (NHM) cash allocation for 2025-26 was sharply reduced from Rs 452.78 crore to Rs 252 crore. He called for immediate restoration of the original allocation to ensure uninterrupted health services across the state.
Water Resources and Power Sector Demands
On water resources and flood management, the state sought:
- Rs 1,053 crore for canal projects under PMKSY
- Operational control of BBMB reservoirs during flood season
- Release of pending dam dues from Jammu & Kashmir
- Rs 443 crore in pending central share under Jal Jeevan Mission
In the power sector, Punjab has demanded:
- Reinstatement of 20% railway freight concession on coal
- Permission to use coal from Pachhwara Central mine for private thermal plants at Talwandi and Nabha
- Reduction in renewable energy trading margins from 7 paise to 2 paise per kWh to lower consumer tariffs
The comprehensive memorandum submitted by Finance Minister Harpal Singh Cheema outlines Punjab's financial stress, security challenges, and developmental priorities as the state prepares for the upcoming Union Budget. The demands reflect the state's position that its border location and recent calamities warrant special consideration in national fiscal planning.
