Punjab and Telangana Demand Additional Resources in FY27 Budget Due to VB-G RAM G Fiscal Burden

During a pre-budget meeting, opposition-led states such as Punjab and Telangana requested more funds from the central government for the 2026-27 Budget. They argued that the proposed VB-G RAM G scheme's 60:40 cost-sharing model would further strain their already limited resources. Union Finance Minister Nirmala Sitharaman chaired the meeting, which included finance ministers from all states and UTs, along with other key officials.

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Punjab Finance Minister Harpal Singh Cheema voiced strong objections to the changes in the MGNREGA framework. He argued that the new model weakens employment guarantees and shifts a significant financial burden onto states. Cheema urged for a return to the original demand-driven structure and funding pattern of the scheme.

Impact on State Resources

Telangana Finance Minister Mallu Bhatti Vikramarka criticised the Union government for replacing MGNREGA with VB-G RAM G without consulting states. The new scheme changes the cost-sharing ratio from 90:10 to 60:40, increasing the financial burden on states. Vikramarka highlighted that any additional man-days beyond normative allocation would be state responsibilities, hindering demand-based work provision.

The Parliament recently passed the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission Gramin (VB-G RAM G) Bill, replacing the 20-year-old Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Under VB-G RAM G, 60% of costs are covered by the Centre, while states bear 40%, unlike MGNREGA's 90:10 ratio.

Concerns Over Cooperative Federalism

Vikramarka stated that these changes contradict cooperative federalism principles and deprive states of funds needed for capital outlay, crucial for growth. He also suggested that surcharges on income and corporation taxes should go into a non-lapsable infrastructure fund for state grants or merge with basic rates to boost central tax pools.

Cheema also addressed GST reforms, noting Punjab's annual revenue loss of nearly Rs 6,000 crore due to GST 2.0 reform. He called for a predictable GST stabilisation or compensation mechanism for states to address this issue.

GST Reforms and Revenue Concerns

Vikramarka expressed concerns about GST 2.0 reform potentially boosting demand but questioned its sustainability over time. He warned that reduced rates might decrease state revenues under GST, necessitating a suitable compensation mechanism for revenue loss.

Punjab requested a special fiscal package from the central government due to challenges like border tensions and floods in 2025. The state emphasised the need for additional support to manage these dual challenges effectively.

The meeting was attended by various officials, including Union Minister of State for Finance Pankaj Chaudhary, Manipur's Governor, and chief ministers from Delhi, Goa, Haryana, Jammu and Kashmir, Meghalaya, and Sikkim. Deputy chief ministers from Arunachal Pradesh, Madhya Pradesh, Odisha, Rajasthan, and Telangana were also present.

With inputs from PTI