4 min readFeb 1, 2026 01:02 PM IST
First published on: Feb 1, 2026 at 01:02 PM IST
Ahead of the Union Budget 2026–27, scheduled to be tabled in the Parliament on Sunday, the Punjab government sought a special fiscal package to help the state recover from a “double whammy” due to prolonged India-Pakistan border tensions followed by devastating floods in 2025.
Punjab Finance Minister Harpal Singh Cheema has already submitted a detailed memorandum outlining the state’s financial stress, security challenges, and developmental priorities. Emphasising the border state’s strategic role as the country’s first line of defence. Cheema said the Union Budget must reflect the spirit of cooperative federalism and respond to the exceptional circumstances faced by the state.
Border Tensions, Floods and Fiscal Stress
The Finance Minister highlighted that heightened border tensions severely disrupted economic activity in large parts of the state, even before unprecedented monsoon floods wreaked havoc later in 2025. The floods, declared a calamity of severe nature by the Ministry of Home Affairs, affected over 2,300 villages and nearly 20,000 families. According to ground-level assessments, the total damage has been pegged at Rs 12,905 crore, Cheema’s memorandum states.
To manage rehabilitation and reconstruction, Cheema sought permission for a one-time additional borrowing limit of 1% of Gross State Domestic Product (GSDP) for 2025–26 under the FRBM Act provisions applicable during natural disasters and national security emergencies. He also demanded flexibility in the use of State Disaster Response Fund (SDRF) balances, including exemption from interest liability.
Rs 1,000 cr for security
Citing growing cross-border threats, including drone-based smuggling and narcotics trafficking, the Punjab government sought a special central assistance of Rs 1,000 crore for police modernisation. The proposed grant would be used to upgrade 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, not a discretionary favour.
Rs 7,757 crore RDF
The state has also demanded the immediate release of Rs 7,757 crore in pending Rural Development Fund (RDF) dues, stating that these funds are critical for maintaining rural roads and infrastructure.
To address the alarming depletion of groundwater, Cheema has pushed for enhanced incentives for paddy diversification. He proposed increasing the incentive from Rs 7,500 to Rs 15,000 per acre, asserting that only a substantial financial push can encourage farmers 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
Cheema said a severe and continuing revenue shock was felt in Punjab following GST 2.0 reforms. According to Cheema, Punjab is facing an annual revenue loss of nearly Rs 6,000 crore, around 44% of its own tax revenue. He pressed for a predictable GST compensation or stabilizstion mechanism to protect states from structural revenue erosion.
Objections to MGNREGA changes
The Finance Minister also strongly opposed proposed changes to the MGNREGA framework, warning that the new model weakens the employment guarantee and shifts a 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”.
‘NHM cash allocation cut sharply’
Cheema pointed out that Punjab’s National Health Mission (NHM) cash allocation for 2025–26 was cut sharply from Rs 452.78 crore to Rs 252 crore. He called for immediate restoration of the original allocation to ensure uninterrupted health services.
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, and Rs 443 crore in pending central share under the Jal Jeevan Mission.
Power sector
In the power sector, Punjab has demanded reinstatement of the 20 per cent railway freight concession on coal, permission to use coal from the Pachhwara Central mine for private thermal plants at Talwandi and Nabha, and a reduction in renewable energy trading margins from 7 paise to 2 paise per kWh to lower consumer tariffs.
The state has also demanded the immediate release of Rs 7,757 crore in pending Rural Development Fund (RDF) dues, stating that these funds are critical for maintaining rural roads and infrastructure. 
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