Finance commission meet: Punjab vows to reduce debt, increase capex
Punjab finance and taxation minister Harpal Singh Cheema says the state has committed to reducing the debt- GSDP ratio of Punjab by a minimum of 1% every year during the award period (2026-27 to 2030-31) of the finance commission.
Punjab government has given a commitment to the 16th finance commission regarding a reduction in its debt-GSDP (gross state domestic product) ratio, curtailment of wasteful spending and an increase in capital expenditure of the state, finance and taxation minister Harpal Singh Cheema said on Wednesday.
Cheema said the state government gave these commitments to the finance commission during their deliberations on devolution of the divisible pool of taxes collected by the Centre to states.
Addressing a press conference here, Cheema said the state has committed to reducing the debt- GSDP ratio of Punjab by a minimum of 1% every year during the award period (2026-27 to 2030-31) of the finance commission, increasing the capital expenditure to 1.50% of GSDP and curbing wasteful spending through rationalisation.
The finance minister said the effort will be to bring down the debt-GSDP ratio by a minimum of 1% and a maximum of 1.5%. According to budget estimates (BE) 2024-25, the state’s gross state domestic product is projected to be ₹8.02 lakh crore at the end of the current fiscal with a debt-GSDP ratio of 46.60.
The commitments would be incumbent upon the state government on acceptance of its demand presented to the finance panel for a special package of ₹1.32 lakh crore over a period of five years commencing April 1, 2026, for the development of the border state. He said the state has urged the finance panel to include cess and surcharges in the divisible pool of taxes.
The 16th finance commission headed by Dr Arvind Panagariya had held deliberations with the state top brass on Monday and Tuesday, respectively.
Asked if the state government was planning to curtail its expenditure on power subsidy, the FM said there was no question of abolishing power subsidy.
He said efforts are being made to meet cut the power generations costs through renewable energy sources such as solar power.
In response to a query on a revenue deficit grant, the finance minister said the state has sought a revenue deficit grant of ₹75,000 crore as a development package. The 15th finance commission had allocated a revenue deficit grant of ₹25,968 crore to the state. Cheema also said the state government is expecting a 2% share in the horizontal division of the states’ aggregate allocation in the divisible pool on the basis of factors such as area, population, forest coverage, and income distance.
The finance minister said the state government has urged the finance panel to allocate a weight of 5% to the proportion of the SC population and 2.5% to the elderly population above 68 years. “We have sought a reduction in the weight assigned to area and forest cover to 12.5% from 15% and 7.5% from 10%, respectively, and an increase in weight of income distance to 47.5% from the present 45%,” he added. The 15th finance commission had increased the state’s share (horizontal division) of the central taxes to 1.807% from 1.577%.
The finance minister also highlighted the loss encountered by Punjab on account of the implementation of GST. He shared that as per internal assessments of the department of excise and taxation, had the VAT regime continued, the state would have earned upwards of ₹45,000 crore as against the budgeted GST of ₹25,750 Crore in the current fiscal. This gap is expected to magnify even further in 2030-31 with VAT estimated at ₹95,000 crore and GST at ₹47,000 crore.
Cheema said that to mitigate the economic losses due to trade restrictions at the Attari-Wagah border, annual compensation has also been requested until the corridor reopens. He said that through this international trade route, Punjab’s agricultural products could reach Central Asian countries. He questioned why trade cannot be conducted via the Attari-Wagah border when the same is allowed through Gujarat ports.
The present finance panel was constituted by the Centre in December 2023 and requested to make its recommendations available by October 31, 2025.