Punjab’s Call for Support: Urging the 16th Finance Commission
Chandigarh/New Delhi, September 30
A high-level Punjab Government delegation, led by Finance Minister Advocate Harpal Cheema, alongside Chief Secretary KAP Sinha and Additional Chief Secretary (Home Affairs and Finance) Alok Shekhar, met with 16th Finance Commission Chairman Dr. Arvind Panagariya in Delhi to advocate for a comprehensive financial support package. The delegation highlighted Punjab’s urgent needs following devastating floods, its strategic challenges as a border state, and fiscal constraints under the GST regime.
Call for Flood Rehabilitation Package
Finance Minister Cheema pressed for a special long-term rehabilitation package to address the ₹20,000 crore damages caused by recent floods—one of the worst in decades—severely impacting crops, homes, and infrastructure, particularly in Punjab’s border districts. He emphasized the state’s strained finances due to its frontline border status and natural calamities, urging tailored support to aid recovery and rebuild affected areas.
Reforming the State Disaster Response Fund (SDRF)
Cheema called for a review of SDRF norms, citing their restrictive nature, which hampers timely and adequate relief efforts. He proposed converting the SDRF into a non-interest-bearing reserve fund, similar to the National Disaster Response Fund (NDRF), noting that Punjab’s SDRF currently bears a ₹7,623 crore interest burden out of a ₹12,268 crore balance. Dr. Panagariya acknowledged this concern and assured it would be discussed in the Commission’s upcoming meeting.
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Support for Border Security and Economic Challenges
The delegation underscored Punjab’s unique security challenges due to its proximity to a hostile border with Pakistan, exacerbated by Operation Sindhoor in 2025, which disrupted daily life, industrial activity, and goods movement in border districts. Cheema highlighted ongoing threats like drone incursions, cross-border smuggling, and narco-terrorism, necessitating heavy investments in security and law enforcement. He requested a dedicated Border Area Package of ₹2,982 crore to strengthen police forces and modernize law enforcement infrastructure, reinforcing Punjab’s role as a second line of defense alongside the Border Security Force (BSF).
Cheema also sought a Special Industrial Package of ₹6,000 crore for border districts, which lag in per capita income due to limited industrial activity and border tensions. The closure of the Wagah border, a key trade corridor, has led to annual economic losses of ₹5,000–8,000 crore. This package, modeled on those for Himachal Pradesh and Jammu & Kashmir, aims to boost industrial development, employment, and inclusive growth.
Fiscal Challenges Under GST
The Finance Minister addressed the adverse impact of the GST regime, which has caused a permanent annual revenue loss of ₹49,727 crore for Punjab due to the subsumption of state taxes without compensation. Recent GST rationalization measures have further strained state finances, necessitating greater fiscal flexibility.
Key Recommendations to the 16th Finance Commission
To ensure fiscal fairness and support Punjab’s development, Cheema proposed:
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Increasing states’ share in the Divisible Pool to 50% (from 42%).
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Including cesses, surcharges, and select non-tax revenue in the Divisible Pool.
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A developmental grant of ₹75,000 crore for Punjab, akin to the 15th Finance Commission’s Revenue Deficit Grant.
Punjab’s Fiscal Indicators
Cheema presented Punjab’s fiscal position for FY 2025-26:
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Revenue Deficit: ₹23,957 crore
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Fiscal Deficit: ₹34,201 crore
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Debt-to-GSDP Ratio: 44.50%
He stressed that favorable recommendations from the 16th Finance Commission are critical for Punjab to meet its security obligations and address economic disadvantages.
Productive Discussions
The meeting was held in a constructive atmosphere, with Dr. Panagariya assuring the delegation that their concerns would be thoroughly evaluated by the Commission. The Punjab delegation’s compelling case highlighted the state’s unique challenges and its pivotal role in national security and economic stability.
