Punjab Seeks Special Economic Package Worth ₹12,905 Crore From Centre Citing Flood Damage and Security Challenges

Punjab Finance Minister Harpal Singh Cheema has formally requested the Centre to extend immediate fiscal assistance and announce a special economic package for the state during a pre-Budget meeting with Union Finance Minister Nirmala Sitharaman. The minister submitted a detailed memorandum outlining Punjab's key financial requirements and policy demands for the 2026-27 Union Budget, citing severe economic challenges faced by the state in 2025.

Flood Damage Assessment and Financial Impact

Punjab experienced devastating floods in 2025, officially declared a calamity of severe nature by the home ministry. The disaster caused widespread destruction across the state, with comprehensive ground-level assessments revealing the extensive scale of damage.

Cheema explained that the state requires fiscal flexibility to manage rehabilitation and reconstruction arising from these extraordinary circumstances. He formally requested permission for a one-time additional borrowing limit of 1% of GSDP for 2025-26 under provisions of the Fiscal Responsibility and Budget Management Act applicable during natural disasters and national security emergencies.

Security Modernisation and Border Challenges

As a border state facing prolonged security tensions along the international border, Punjab has sought special central assistance for strengthening its defence capabilities. The state emphasized its role as the country's first line of defence and the disproportionate security burden it bears.

Cheema stated that this support should be viewed as cooperative federalism in action, not as a concession, given the state's strategic importance in national security.

Agricultural and Rural Infrastructure Demands

The Punjab government has raised concerns about pending rural development funds and the need for agricultural diversification incentives. The state highlighted critical infrastructure maintenance requirements and the urgent need to shift away from water-intensive crops.

Key demands include:

• Immediate release of pending Rural Development Fund worth ₹7,757.00 crore calculated up to June 2025
• Special budgetary allocation for paddy diversification
• Increase in diversification incentive to ₹15,000.00 per acre to drive behavioural change among farmers
• Focus on safeguarding groundwater resources through crop pattern changes

GST Revenue Impact and Compensation Mechanism

Punjab has highlighted severe revenue challenges following GST implementation, with the state experiencing significant financial losses. The minister pressed for structural reforms to address ongoing revenue erosion.

Cheema emphasized that the fiscal sustainability of states cannot be compromised and strongly advocated for a predictable GST stabilisation or compensation mechanism for states facing structural revenue erosion.

MGNREGA Framework Concerns

The Punjab Finance Minister expressed strong opposition to proposed changes to the MGNREGA framework, arguing that the new model dilutes the employment guarantee and transfers significant financial burden to states. He called for restoration of the original demand-driven structure and funding pattern of the scheme to maintain its effectiveness in providing rural employment opportunities.