Punjab Seeks Additional Rs 10,000 Crore Borrowing Limit Amid Financial Struggles

Punjab Seeks Additional Rs 10,000 Crore Borrowing Limit Amid Financial Struggles

The Punjab Government has requested an extra borrowing limit of Rs 10,000 crore for the current fiscal year to meet its financial obligations. This request has been submitted to the Union Finance Ministry, seeking an increase beyond the already sanctioned borrowing limit of Rs 30,464.92 crore. So far, the state has borrowed Rs 13,094.34 crore of this limit by July.

The state government has cited a legacy debt inherited from previous administrations as a major contributor to its financial strain. This year, Punjab must repay Rs 69,867 crore in loans, while Rs 23,900 crore of its receipts will be allocated just to cover interest payments on these loans.

Despite growth in revenue over recent years, the state’s expenditures have escalated at a higher rate. Last year, Punjab’s borrowing limit was reduced due to the financial losses of Punjab State Power Corporation Limited (PSPCL), which continued despite participation in the UDAY scheme. This reduction, along with cuts in capital assistance, reduced the state’s borrowing limit by Rs 4,194 crore.

In addition to these challenges, Rs 8,500 crore in dues owed by the Centre remain unpaid. The state faced delays in disbursing salaries in September, with the August salaries being released four days late.

To address the revenue shortfall, the Punjab Government has implemented several measures to raise additional income. These include increasing property registration fees, raising road taxes, withdrawing power subsidies for households with up to 7 KW load, and increasing VAT on fuel. Additionally, bus fares have been raised, which is expected to bring in Rs 150 crore in revenue. These steps aim to boost the state’s revenues by Rs 3,000 crore annually.

However, these measures may not be enough. Government officials have indicated plans to escalate the issue to the Prime Minister’s Office, seeking further assistance. They claim that the Centre has not released funds under the Rural Development Fund and National Health Mission, and with the discontinuation of GST compensation and a reduced revenue deficit grant—from Rs 5,618 crore last year to Rs 1,995 crore this year—the state faces further financial challenges.

Key Challenges:

• Last year, the state’s borrowing limit was reduced by Rs 4,194 crore.
• Of the Rs 30,464.92 crore borrowing limit for the current year, Rs 13,094.34 crore has already been borrowed.
• Despite efforts to raise Rs 3,000 crore in additional revenue, the discontinuation of GST compensation and a significantly reduced revenue deficit grant have added pressure to the state’s finances.