Opposition-ruled states Punjab and Telangana on Saturday sought additional financial support from the Center in the Union Budget 2026-27, arguing that the proposed Developed India Guarantee for Employment and Livelihood Mission (Rural) (VB-G RAMG) will impose a heavy financial burden on the states due to its revised cost-sharing formula, PTI reported.The demands were raised at the pre-budget meeting chaired by Union Finance Minister Nirmala Sitharaman, which was attended by Union Minister of State for Finance Pankaj Choudhary along with finance ministers of states and union territories. The meeting was also attended by the Governor of Manipur, Chief Ministers of Delhi, Goa, Haryana, Jammu and Kashmir, Meghalaya and Sikkim and Deputy Chief Ministers of several states including Telangana.The opposition-ruled states said the changes in the rural employment structure weaken the employment guarantee and go against the spirit of cooperative federalism.Parliament last month passed the VB-G RAMG Bill, replacing the two-decade-old Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA). Under the new scheme, the Center will bear 60 per cent of the cost and the state 40 per cent, while the funding pattern under MNREGA is 90:10.Punjab Finance Minister Harpal Singh Cheema strongly opposed the proposed changes, saying that the new framework weakens the employment guarantee while placing a significant financial burden on the states.At the meeting, Cheema called for restoring the scheme’s original demand-driven structure and funding pattern, saying, “The proposed MNREGA changes weaken the employment guarantee and put the burden on the states.”Telangana Finance Minister Mallu Bhatti Vikramarka said that the central government has replaced MNREGA with VB-G RAMG without consulting the states. He said the change in funding ratio from 90:10 to 60:40 would put further pressure on the state’s finances.He also pointed out that any additional man days beyond the standard allocation will now have to be borne by the states, which will create a serious hindrance in providing demand-based work to job seekers.“This is completely against the spirit of cooperative federalism and is depriving them of funds for capital outlay, which is necessary to maintain the pace of growth,” Vikramarka said.The Finance Minister of Telangana also suggested that the surcharge on income tax and corporation tax be deposited into a non-lapse infrastructure fund, from which the state can receive grants for infrastructure development. Alternatively, he said, the surcharge should be merged with the basic tax rates to expand the divisible pool of central taxes.On GST reforms, Vikramarka said GST 2.0 could boost demand, but questioned its sustainability, warning that states’ revenues could fall due to rate cuts. He called for an appropriate mechanism to compensate the states for any revenue loss.Punjab also sought a special fiscal package citing the “double whammy” of border tensions and floods in 2025. On GST, Cheema said Punjab is facing an annual revenue loss of about Rs 6,000 crore after GST 2.0 and pressed for a predictable GST stabilization or compensation mechanism for states.
