Budget 2026: Uttar Pradesh's billion-dollar wishlist to Centre in major capex push

Uttar Pradesh Chief Minister Yogi Adityanath.

• UP requests Rs 1.3 lakh crore central aid for health, education, and infrastructure.
• State requests funds for AIIMS, IIT, metro expansion, and water conservation
• UP flags revenue loss, urges fair share of central taxes and GST reforms

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Ahead of the Union Budget 2026–27, the Uttar Pradesh government has sought around Rs 1.30 lakh crore in central assistance for a wide range of projects spanning health, education, urban infrastructure, water conservation and renewable energy, signalling an aggressive push to scale up public investment in the country’s most populous state.

The demands were placed before Union Finance Minister Nirmala Sitharaman at a pre-Budget meeting of state finance ministers, where Uttar Pradesh Finance Minister Suresh Kumar Khanna outlined what he described as the state’s expanding development needs.

“Uttar Pradesh is progressing rapidly, but given its vast population and geographical spread, sustained and stronger central support is essential,” Khanna told Moneycontrol.

According to officials, the state has sought approval and funding for setting up an AIIMS in western Uttar Pradesh, opening an IIT in Bundelkhand and expanding metro rail services in major urban centres. For metro expansion in Lucknow, Kanpur and Agra, along with the development of new metro networks in other cities, Uttar Pradesh has projected a funding requirement of Rs 32,075 crore over the long term.

In the water sector, the state has flagged a major funding gap under the Jal Jeevan Mission. Uttar Pradesh said 40,955 drinking water projects with a total cost of Rs 1,53,876 crore have already been approved. Of the Centre’s committed share of Rs 71,221 crore, only Rs 38,456 crore has been released so far, with the last instalment received in July 2024. The state has sought early release of the remaining Rs 33,300 crore, warning that further delays could seriously impact the timely completion of ongoing projects.

Urban development and sustainability initiatives also featured prominently. The government has asked for Rs 1,005 crore in central assistance to develop 17 municipal corporations, including Ayodhya, as solar cities by 2030. It has additionally sought Rs 6,000 crore for rejuvenation of 60,000 ponds and for grey and black water management, positioning water conservation as a core climate and public health priority.

On the social infrastructure front, Uttar Pradesh has demanded Rs 855 crore to upgrade schools under the PM Shri scheme. It has also raised concerns over the financial burden of welfare schemes, particularly old-age pensions. While the pension amount has been doubled from Rs 500 to Rs 1,000, Khanna pointed out that the Centre’s share has remained unchanged, leaving states to absorb the entire incremental cost.

The state also pressed for an enhancement of the overall outlay under the Scheme for Special Assistance to States for Capital Investment, arguing that the current cap of Rs 1.50 lakh crore is insufficient to meet growing infrastructure needs.

Khanna used the forum to underline Uttar Pradesh’s improving investment climate. He said that through various Ground Breaking Ceremonies, investment commitments exceeding Rs 15 lakh crore have been implemented, with the state achieving realisation of about 36–38 percent of proposals on the ground, among the highest in the country.

Fiscal federalism issues were another key focus. Uttar Pradesh expressed concern over a decline in its share of the divisible pool of central taxes following the 16th Finance Commission. The state’s share has fallen from 19.67 percent to around 17.93 percent, which Khanna said has led to continuous revenue loss. He argued that despite limited forest cover, Uttar Pradesh has undertaken large-scale plantation drives in the national interest and therefore expects a “fair and just” share from the Centre.

GST-related matters were also flagged. The state said tax collections from pan masala and tobacco products have dropped sharply from around Rs 1,000 crore in the pre-GST regime to about Rs 300 crore now, despite no significant decline in consumption. It urged the Centre to consider reverting to a capacity-based or production-based taxation framework for such products.

With the funds sought to be provided for the financial year 2026–27, which will run into the period leading up to the next Uttar Pradesh Assembly elections, the state government said a positive response in the Union Budget would enable large-scale expansion of health, education, transport and core infrastructure, giving fresh momentum to its development agenda.

“To make Uttar Pradesh ‘Uttam Pradesh’, we placed our suggestions before the Union finance minister. The Centre has supported us in the past, and we expect that support to continue,” Khanna told Moneycontrol.