During the meeting Mann made a strong pitch for the special package for the state. He sought funds of Rs 1,32, 247 crore comprising funds worth Rs 75,000 crore for development, Rs 17,950 crore for agriculture and crop diversification, Rs 5,025 crore for checking stubble burning, Rs 8,846 crore for tackling narco terrorism and drug abuse, Rs 6,000 crore for industry revitalization; Rs 9,426 crore for urban local bodies, and Rs 10,000 crore for rural local bodies.

“Due to the immense contribution of Punjab in making the country self-sufficient in food production, obtaining and preserving independence, the state should be given a special economic package. Punjabis have already carved a niche for themselves in every country across the globe and the package will further give impetus to economic growth of the state,” he said.

Speaking to the media, Panagariya said Mann gave the general overview of Punjab on economic and finance fronts.

“The key mandate of the finance commission is to make recommendations on how the central taxes, which are sharable, should be divided first between the Centre and 28 states and then whatever is the kitty of 28 states, how that should be divided among the 28 states. The first division is the division between the Centre and 28 states taken together is called vertical division. Second, the division of kitty among 28 states is called horizontal division or horizontal devolution,” he said.

“Punjab has demanded that vertical devolution should be increased in favour of the states from its current level of 41 per cent to 50 per cent, meaning that whatever taxes that are shareable, 50 per cent of those should go to the states and 50 per cent to the Centre as opposed to what is the current division which is 41 per cent to the states and 59 per cent to the Centre,” he added.

On the horizontal devolution, the chairman said the state demanded some changes in weightage given to criteria like population and area for division of funds.

He said CM Mann gave the general overview of Punjab’s economy. Finance Minister Harpal Singh Cheema also spoke on the similar lines and the finance secretary gave a presentation covering socio-economic, demographic and fiscal profile, impact of GST of state’s revenue.

The state finance secretary talked about the challenges facing Punjab, in which he discussed issues relating to growth, how the state’s economic growth has been slower than the average growth in all the states.

Mann said that the state government has embarked on a “journey of profound reforms: aimed at bringing efficiency, transparent governance, and robust economic growth. He said that the state government has undertaken a slew of pro-people reforms.

In last two years alone, the state’s own tax revenue has witnessed growth surpassing national growth rates. He said that GST revenue has gone up by 33% and Excise alone has gone up by more than 50 per cent.

Citing examples of legacy debt, Mann said that CCL loan of Rs 30,584 crore that was taken in March 2017 or substantial untargeted subsidies given right before elections in 2021 has affected state’s economy. “Repercussions of these actions are still being felt today, as we strive to achieve financial consolidation amidst these inherited challenges,” he said. In addition to legacy problems, Punjab, being a border state, is incidental to narco-terrorism and hostile border activity due to which a large number of Police force is recruited to man more than 500 kilometres of the international border.

He urged the commission to allot funds for modernisation of police so that national duty can be discharged efficiently.

Rvenue deficit grant

Punjab has sought a revenue deficit grant, but Panagariya, remained non-committal and said it is too early to reply to the same as the commission is yet to visit other states.

“Generally, the finance commission gives revenue deficit grants. But how much it will be and to which states it will be given, all this will be known after the assessment of states,” he said.

Subsidy burden

Panagariya said that subsidy was a part of overall discussion on the deficit and the debt. “The larger part of the subsidy of 95 per cent is spent on power. That part has been rising,” he said, adding that rationalisation was “state’s own issue.”

Punjab government demanded a grant from the commission to switch over to solarisation of power for agriculture as well as domestic sectors. The demand for funds, as well as a road map for reducing the huge annual power subsidy bill of Rs 20,200 crore was put forth.

Underground water

Mann said the hard-working farmers of the state produced food for the country by over-exploiting its only available natural resources in terms of fertile soil and water. Almost all the blocks of the state have gone into dark zones as far as the groundwater is concerned due to which the water of the state is rapidly depleting, he said, adding the state was facing desertification. Mann said that high powered motors that are used to extract oil in Dubai and other Gulf nations are being used for drawaig ground water in the state.

Panagariya confirmed that the the issue was raised in the meeting, “I was told that in some districts the water level has gone down to 600 feet,” he added.

Crop diversification

Mann said that the only way out to save water is to promote crop diversification adding that it is a matter of satisfaction that the Finance Commission has accepted the state’s proposal of state government to incentivize diversification by providing Rs 17,500 per hectare to farmers for other crops adding that this will go a long way in breaking the two-crop cycle. Mann said that to save the groundwater, the state government is promoting usage of canal water adding that as compared to earlier 30%, now Punjab is using 70% of canal water for irrigation.
Weightage to foodgrain production

Panagariya said that the commission will consider giving weightage to the state’s contribution to food security of the country. Responding to a question that last commission gave 10 per cent weightage for forest cover and Punjab suffered as its land is mainly under agriculture, he said that the state government had not raised the issue. “The state has sought reducing the percentage of weightage to forest cover from 10 per cent to 7.5 per cent. For considering Punjab’s contribution in food security, we will discuss it. This is a good idea,” he said.

Fund withheld by Centre

To a question on the Punjab government’s claim of withholding of certain funds by the Centre, the FC chairman said such complaints have come from other states as well. “But it is the Centre which is to take a decision,” he said.

The Punjab government has alleged that the Centre had withheld its rural development fund and funds for national health mission.