Opposition States Demand More Funds Amid Budget Discussions: What’s at Stake?
Budget Meeting Highlights
New Delhi: On Saturday, states governed by opposition parties, including Punjab and Telangana, urged the central government for increased financial support in the upcoming 2026-27 Budget. They expressed concerns that the proposed 60:40 cost-sharing model under the VB-G RAM G scheme would exacerbate the financial strain on their already limited resources.
Union Finance Minister Nirmala Sitharaman led a pre-budget discussion with finance ministers from various states and Union Territories. The meeting also included Union Minister of State for Finance Pankaj Chaudhary, the Governor of Manipur, and Chief Ministers from Delhi, Goa, Haryana, Jammu and Kashmir, Meghalaya, and Sikkim, along with deputy Chief Ministers from Arunachal Pradesh, Madhya Pradesh, Odisha, Rajasthan, and Telangana.
During the meeting, representatives from opposition-led states criticized the proposed changes to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), arguing that these modifications would undermine the employment guarantee and contradict the principles of cooperative federalism.
Recently, Parliament passed the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) (VB-G RAM G) Bill, which replaces the long-standing MGNREGA. Under this new scheme, the central government will cover 60% of the costs, while states will be responsible for the remaining 40%, a significant shift from the previous 90:10 funding ratio.
Punjab's Finance Minister Harpal Singh Cheema voiced strong opposition to the alterations in the MGNREGA framework, claiming that the new structure diminishes the employment guarantee and shifts a considerable financial burden onto the states.
He advocated for the reinstatement of the original demand-driven framework and funding model of the scheme.
Cheema stated, "Proposed MGNREGA changes weaken employment guarantee, burden states," during the pre-Budget meeting.
Telangana's Finance Minister Mallu Bhatti Vikramarka criticized the Union government for implementing the VB-G RAM G scheme without consulting the states, highlighting that the new cost-sharing model would further strain state resources. He noted that any additional workdays beyond the standard allocation would fall on the states, creating significant challenges in meeting job seekers' demands.
Vikramarka remarked, "This is entirely against the spirit of cooperative federalism and deprives states of necessary funds for capital investments, crucial for sustaining growth."
He also proposed that surcharges on income and corporate taxes be allocated to a non-lapsable infrastructure fund to support state infrastructure projects. Alternatively, he suggested merging these surcharges with basic rates to increase the divisible pool of central taxes.
While acknowledging that GST 2.0 reforms could stimulate demand, Vikramarka expressed skepticism about their sustainability over time. He warned that states might experience revenue declines due to potential rate reductions and called for a mechanism to compensate states for any revenue losses.
Additionally, Punjab requested a special fiscal package from the central government, citing the dual challenges of border tensions and flooding in 2025.
Cheema highlighted that Punjab is facing an annual revenue shortfall of approximately Rs 6,000 crore due to GST 2.0 reforms and urged for a reliable GST stabilization or compensation framework for states.