Punjab delegation calls on 16th Finance Commission Chairman, seeks special rehabilitation package

New Delhi [India], September 30 (ANI): A high-level delegation of the Punjab Government comprising the state's Finance Minister Advocate Harpal Singh Cheema, Chief Secretary KAP Sinha, and Additional Chief Secretary, Home Affairs and Finance, Alok Shekhar, on Tuesday met the Chairman of the 16th Finance Commission, Dr Arvind Panagariya, in Delhi.
According to an official release, the delegation met Dr Panagariya to present a forceful case for the special long-term rehabilitation package to the state, citing the recent experience with devastating floods, among the worst in decades, which caused an estimated damage of Rs 20,000 Crores, particularly in border areas, to crops, homes, and infrastructure.
Finance Minister Harpal Singh Cheema highlighted the immense strain placed on Punjab's finances due to its unique status as a frontline border state, recent natural calamities, and the structural disadvantages arising from the shift to the Goods and Services Tax (GST) regime.
The release said the minister initiated the discussion by addressing the immediate need to reform the State Disaster Response Fund (SDRF) norms. Additonally, he also emphasised that existing SDRF norms have proven to be too restrictive and rigid, as they severely constrain the State Government's ability to provide timely and adequate relief.

Further, he also emphasised that it is therefore imperative that these guidelines be comprehensively reviewed to incorporate flexibility and provisions for state-specific disasters.
The Punjab Finance Minister emphasised the need to convert the SDRF into a non-interest-bearing reserve fund, similar to the National Disaster Response Fund (NDRF). Notably, Punjab's fund currently holds a substantial interest accumulation of Rs 7,623 Crores out of a total balance of Rs 12,268 Crores. The Chairman of the Finance Commission acknowledged the concern raised by the Punjab Finance Minister and assured that it would be discussed with the Commission members in their upcoming meeting, the release stated.
Reiterating the demands put forth by the state in the last meeting with the 16th Finance Commission, the Finance Minister also called for dedicated financial support to states sharing a hostile border. He informed the Commission that the heightened tensions with Pakistan, particularly in the wake of Operation Sindhoor earlier this year, have caused massive economic losses to the state's border districts through repeated disruptions to daily life, industrial activity, and the movement of goods.
"Punjab continues to face unique security challenges, including drone incursions, cross-border smuggling, and narco-terrorism, which demand constant, heavy investment in security and law enforcement", Cheema added.
Additionally, the Finance Minister also apprised the Chairman that the state is investing heavily in infrastructure and police modernisation to create an effective second line of defence in support of the Border Security Force (BSF). The Minister requested a dedicated Border Area Package to strengthen police forces and law enforcement infrastructure, and has requested Rs 2,982 Crores in its memorandum to the Commission. He said that this support is crucial for ensuring both national security and regional stability.
Moreover, Finance Minister Cheema also sought a special Industrial Package for Border Districts. He stated that these districts consistently lag behind the state average in per capita income due to limited industrial activity resulting from border tensions.
"The closure of the Wagah border, once a vital trade corridor, has caused estimated losses of Rs 5,000 - 8,000 Crores per annum, further exacerbating the economic setback. To correct this structural disadvantage and foster inclusive growth, a special industrial development package is essential to revive industry and generate employment", said Cheema.
The Punjab Government stated that the state has requested a total of Rs 6,000 Crores for this package, which consists of funds for industrial development, maintenance, and incentives, drawing a parallel to similar packages already announced for neighbouring regions, such as Himachal Pradesh and Jammu & Kashmir.
The Finance Minister also addressed the adverse fiscal effects of implementing the GST regime. He said, "Punjab has incurred a permanent loss of Rs 49,727 Crores per annum due to the subsuming of various state taxes for which no compensation has been provided, a figure further compounded by the expected impact of recent GST rationalisation on state finances."
To ensure greater fiscal space and fairness for the states, the Finance Minister proposed significant recommendations to the 16th Finance Commission. The major suggestions put forth include increasing the share of states to 50% of the Divisible Pool (up from the current 42%), as well as the inclusion of cesses, surcharges, and select non-tax revenue in the Divisible Pool. Additionally, the Finance Minister requested a developmental grant of Rs 75,000 Crores for the State of Punjab, on the lines of the Revenue Deficit Grant provided by the 15th Finance Commission.
Later, Finance Minister Harpal Singh Cheema also presented the state's latest fiscal indicators, noting a Revenue Deficit of Rs 23,957 Crores and a Fiscal Deficit of Rs 34,201 Crores for FY 2025-26, with the debt-to-GSDP ratio standing at 44.50%. He reiterated that a favourable recommendation by the 16th Finance Commission is indispensable for Punjab to meet its critical security obligations and reverse its economic disadvantages.
According to the Punjab Government, Finance Commission Chairman Dr Arvind Panagariya assured the delegation that the points raised would be carefully considered. (ANI)