Chandigarh, Feb. 2 -- The Sixteenth Finance Commission (SFC), which did not propose any revenue deficit grants for states, has recommended grants worth Rs.19,623 crore for rural and urban local bodies and disaster management in Punjab for the five-year period beginning April 1, 2026, while also increasing the state's share in central taxes. The grants, recommended by the SFC in the report tabled in the Lok Sabha by Union finance minister Nirmala Sitharaman on Sunday, include Rs.16,320 crore for rural and urban local bodies, with the remaining Rs.3,303 crore earmarked for disaster management in the state. These grants will be provided to Punjab over the five-year period between 2026 and 2031, with an upward trajectory. Sitharaman, in her budget speech, said the government had accepted the recommendations of the commission, headed by economist Dr Arvind Panagariya. The Finance Commission is a constitutional body having the mandate to determine tax sharing between the Centre and states every five years. Of the total local body grants, Rs.8,486 crore have been recommended for rural local bodies (RLBs) and Rs.7,834 crore for urban local bodies (ULBs) for the award period. These grants are divided into basic and performance-linked components. The allocation for RLBs comprises a basic grant of Rs.6,789 crore and a performance-linked grant of Rs.1,697 crore, while for ULBs, the corresponding figures are Rs.6,267 crore and Rs.1,567 crore, respectively. According to the SFC, the focus areas include solid waste management, sanitation and water management. The performance conditions require the state government to transfer a matching grant of at least 20% of the basic grants to local bodies. For ULBs, this also includes a minimum annual increase of 5% in their own source revenue (OSR). Out of the total Rs.3,303 crore for disaster management, Rs.2,642, including central share of Rs.1,981.50 crore and state share of Rs.660.50 crore, have been allocated for the State Disaster Response Fund (SDRF) for the five-year period. Similarly, Rs.661 crore have been earmarked for the State Disaster Mitigation Fund (SDMF), including the central and state shares of Rs.495.75 crore and Rs.165.25 crore, respectively. The allocation of disaster management funds for the states is based on past expenditures and Disaster Risk Index (hazard, exposure and vulnerability). The central government has accepted the Sixteenth Finance Commission's recommendation of making no change in states' share in central taxes, retaining it at 41%. However, there is some good news for Punjab as the state's individual share in the taxes devolved by the Centre has increased to 1.996% from 1.807% decided by the Fifteenth Finance Commission (2021-2025). The state's share was 1.577% during the Fourteenth Finance Commission period (2015-2020). The increase is expected to yield additional funds of around Rs.1,500 crore for the state, a top state functionary said. In a setback for Punjab, the SFC has done away with the revenue deficit grant, a fiscal lifeline to offset the state's revenue shortfall. "In continuation of the diminishing trend of the revenue deficit grants recommended by the Fifteenth Finance Commission, we do not recommend any revenue deficit grants to states. We also do not recommend any sector-specific or state-specific grants," it said. The Fifteenth Finance Commission had provided a revenue deficit grant of Rs.25,968 crore for Punjab from 2021-22 to 2025-26. Punjab was among the 17 states that received revenue deficit grants during the five-year period. Finance minister Harpal Singh Cheema said the state government had high expectations from the commission, but its recommendations fell short. "The commission has put a stop to the revenue deficit grant. Also, the norms for the disaster relief funds have been tightened whereas we had requested for relaxation. Being a border state, we had also sought a special package for border areas, particularly for the development of an industrial corridor, but there are no state-specific grants," he added. The SFC, which emphasised the need for power sector reforms and making subsidies efficient, pointed out that power distribution companies in states such as Punjab, Bihar, Karnataka and Madhya Pradesh are heavily reliant on subsidy income. In Punjab, subsidies account for 41% of their annual revenue requirement. "Power subsidy saw the fastest annual growth in Andhra Pradesh at 26.4% between 2018-19 and 2025-26 Budget Estimates, followed by Telangana at 22%, Jharkhand at 19.9% and Punjab at 16.2%," it said. In 2023-24, Punjab paid the highest subsidy per capita of Rs.5,893 in the country. The commission further stated that states like Tamil Nadu, Punjab, Rajasthan and Himachal Pradesh, that provide power subsidies to large groups, have somewhat regressive benefits that flow disproportionately to higher consumption households....