Last week, the state told the central government that it needs to borrow an additional Rs 10,000 crore over and above the sanctioned limit of Rs 30,465 crore.
Last year, Centre cut the state’s borrowing limit after the Mann government failed to reduce losses incurred by Punjab State Power Corporation Ltd. In the post-pandemic period, the Centre has allowed states additional borrowing space, but this was contingent on the states implementing reforms in their power sectors. It is this additional borrowing amount that was reduced for Punjab, since the reforms were not carried out in their entirety.
Presenting the annual budget in March, state finance minister Harpal Cheema had projected Punjab’s debt to touch Rs 3.74 lakh crore at the end of this fiscal year, more than 46 percent of the state’s GDP. More than Rs 41,000 crore will be raised through borrowings and loans this year alone, Cheema had told the House.
Going by these numbers, when divided by the state’s total population of over three crore, each resident of Punjab will be saddled with a debt of Rs 1.24 lakh.
Last month Satnam Singh Sandhu, the BJP MP from Punjab in the Rajya Sabha, sought a reply from the Union finance minister about Punjab’s burgeoning debt. The Minister of State for Finance, Pankaj Chaudhary, informed the House the 2024 budget estimates had pegged it at a whopping Rs 3.51 lakh crore.
As the state’s financial problems spiral, opposition parties have jumped in to target the state’s handling of the economy. Leader of the Opposition Partap Singh Bajwa sought an all-party meeting to deal with the crisis, while the Shiromani Akali Dal (SAD) accused the state government of misappropriation and mismanagement, and demanded a probe by the Centre into the Mann government’s expenditure.
Writing on X, Bajwa said every single Punjabi had been forced to bear the brunt of the financial problems in two-and-a-half years of the AAP government. “The Punjab CM and his cabinet colleagues, who have gotten drunk on their ego, are least bothered about Punjab and the Punjabis. What is even wrong with calling an all-party meeting in such a situation.”
The fund-starved @AAPPunjab government has sought an additional borrowing limit of Rs 10,000 crore for the ongoing Financial Year. The AAP sent a letter to the Union Finance Minister in this regard. pic.twitter.com/pD9cCD23r7
— Partap Singh Bajwa (@Partap_Sbajwa) September 9, 2024
The state Congress chief, Amarinder Singh Raja Warring, wrote on X the chief minister was wasting precious money on ads and events while ignoring the financial crisis.
CM @BhagwantMann ji’s priorities are clear: waste money on ads & events, ignore state’s financial crisis! Punjab seeks ₹10,000 cr additional borrowing limit. ₹73,000 cr revenue shortfall, ₹23,900 cr interest payments, & still, no solution in sight! #PunjabInShambles… pic.twitter.com/u6Kpx4xrXS
— Amarinder Singh Raja Warring (@RajaBrar_INC) September 9, 2024
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Tax burden
The Mann government is also facing severe criticism for increasing the tax burden in a bid to improve its finances. In an effort to reduce its debt burden, the government in August increased collector rates for registration of property and road tax on vehicles.
The government also increased the value-added tax (VAT) on fuel by 92 paisa per litre on diesel and 61 paisa per litre on petrol last week. That same week, it withdrew power subsidies to domestic consumers with a load of up to seven kilowatts. The subsidy was first offered during the Congress government in the state in November 2021.
And on Monday, the government hiked government bus fares by 23 paisa per passenger per kilometre.
Senior SAD leader Parambans Singh Romana said at a press conference Tuesday that the AAP had burdened the common man with new taxes of Rs 12,500 crore while it had not undertaken any new infrastructure projects or social welfare schemes. Romana attributed Punjab’s financial crisis to “gross financial mismanagement and misappropriation”, huge advertisement expenditure on promoting Chief Minister Mann and AAP national convenor Arvind Kejriwal as well as hiring helicopters and aircraft for campaigning in other states.
“I challenge Chief Minister Bhagwant Mann to name one new infrastructure project taken up by his government or debate the closure of all social welfare schemes by the AAP government. I am ready to debate on this issue as well as the acute financial crisis facing the state at any stage of his choice,” he said.
Romana said Punjab had been pushed into bankruptcy with the state recording the second-highest debt-to-GSDP ratio of 46.81 percent.
According to him, the debt-to-GSDP ratio was 40.15 percent when the SAD government took over the reins of the state in 2007 and had been brought down to 33 percent by 2017.
“Since then, the state’s finances have gone downhill with the Congress raising the debt-to-GSDP ratio to 45 percent in 2022 and now it has gone up to 46.81 percent,” he said.
He added that governance itself was in question with the annual fiscal deficit rising to Rs 34,000 crore.
Legacy of debt
Sources in the government said the administration had asked for an additional borrowing limit on the grounds that it had inherited a legacy of debt from the previous government.
Punjab has told the finance ministry the state government has already repaid almost Rs 70,000 crore worth of loans and its annual interest bill alone is almost Rs 24,000 crore.
In July, Mann sought a bailout package from the 16th Finance Commission, asking for Rs 1.32 lakh crore.
The chief minister told Finance Commission members that the bailout package includes development funds worth Rs 75,000 crore, Rs 17,950 crore for agriculture and paddy diversification, Rs 5,025 crore to prevent stubble burning, Rs 8,846 crore for tackling narco-terrorism and drug abuse, and Rs 6,000 crore for industry revitalisation.
Mann said Rs 9,426 crore should also be given for urban local bodies and Rs 10,000 crore for rural local bodies.
“On the one hand, the chief minister goes to public functions and speaks from the dais that his state has a lot of money and there is no problem with funds. Then why go to the Centre with a begging bowl?” senior BJP leader Subhash Sharma told ThePrint Tuesday.
“AAP has taken Punjab’s people for a ride and their bluff has now been called. Where is the Rs 54,000 crore they said they would earn from excise alone or the Rs 20,000 crore they were supposed to earn by plugging the loopholes in the illegal mining activities?”
“The speed at which the Mann government is asking for loans is four times the speed any other government has sought loans. They have taken loans worth Rs 1 lakh crore in just two-and-a-half years. The fact is that Punjab is a financial mess hurtling towards bankruptcy.”
Economists have warned the government that populist spending, subsidies, freebies, doles and an ever-increasing salary and pensions bill are leaving no money for the state’s development. Experts say Punjab needs to put its own house in order to rescue the state’s economy, which was left behind while other parts of the country strode ahead.
“Punjab has got into a situation where one government gives a dole and the next government is forced to continue with it. Its a vicious circle of freebies. Political parties across the board do not come out with manifestoes but ‘menufestoes’. On the menu is free monthly grants, free power, free travel, free this, free that. Freebies bleed the finances without leading to any upliftment of the state,” Dr Pramod Kumar, heading the Institute of Development and Communication (IDC) in Chandigarh, told ThePrint.
In this year’s budget, the finance minister said the government would spend almost Rs 3,000 crore less on capital expenditure than last year. The capital expenditure proposed in last year’s budget was over Rs 10,300 crore while this year it is Rs 7,400 crore.
Of the proposed 1.27 lakh crore revenue expenditure for this year, the government will spend over Rs 35,000 crore on salaries and wages and another almost Rs 20,000 crore on paying pensions. Of the rest, almost Rs 24,000 crore will be spent on interest payments.
Another Rs 9,330 crore has been allocated for power subsidy to agriculture and Rs 7,780 has been kept aside to offset the power bills of domestic power consumers who get zero bills in case their power consumption was less than 300 units per month.
(Edited by Sugita Katyal)
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