CHANDIGARH: A fresh confrontation appears to be brewing between the Aam Aadmi Party (AAP)-led Punjab Government and the BJP-led Union Government after the Centre slashed Punjab’s open market borrowing limit by Rs 16,676 crore.
The move is expected to have widespread ramifications for the debt-ridden state, which depends heavily on annual loans. The state’s outstanding debt is projected to touch Rs 14.17 lakh crore by the end of fiscal 2025-26.
The Opposition Congress seized the opportunity to criticise the AAP government, accusing it of wreaking havoc on the state's economy.
Sources said the state had sought approval for Rs 47,076.40 crore under the open market borrowing (OMB) limit, but the Union Government imposed a cut of Rs 16,676 crore.
The Department of Expenditure under the Union Ministry of Finance has communicated this to the Reserve Bank of India and informed the state government accordingly.
The deduction is understood to be due to multiple pending liabilities, including unpaid power subsidies of Rs 5,444 crore, power subsidy arrears of Rs 4,107 crore, additional borrowing linked to the power sector of Rs 4,151.60 crore, and borrowings from previous years worth Rs 1,976 crore.
For the first nine months of the financial year, April to December, Punjab has received approval to borrow Rs 21,905 crore against a request for Rs 35,307 crore.
For the entire fiscal, the state had sought a gross borrowing limit of Rs 51,117 crore, which included other borrowing components like negotiated loans from NABARD, SIDBI, and transfers from the state provident fund and public accounts.
Sources also revealed that nearly 90 per cent of this new OMB limit will go towards debt servicing and repaying old loans. This fiscal year, the state must repay debt worth Rs 18,198.89 crore, while Rs 24,995.49 crore will be used for interest payments on previous loans.
Punjab is expected to face a revenue deficit of Rs 23,957.28 crore, with revenue receipts projected at Rs 1.11 lakh crore against estimated revenue expenditure of Rs 1.35 lakh crore.
Reacting sharply, Punjab Finance Minister Harpal Singh Cheema said, “This cut in the borrowing limit is financial strangulation of the state, especially at a time when the Union Government is already imposing cuts on pending dues such as the Rural Development Fund. Earlier, we had agreed and started routing all funds through the consolidated fund. But despite that, these financial cuts are being imposed on the state.”
Congress leader and Leader of the Opposition Partap Singh Bajwa also hit out at the state government, holding it responsible for Punjab's mounting fiscal crisis.
“Against the limit of Rs 47,076.40 crore sought by the AAP government, a cut of Rs 16,676 crore has been imposed. The question arises: why does the Punjab Government depend so much on borrowing? Why could the AAP government not raise revenue from other sources as promised before the Assembly elections?” Bajwa asked.
“AAP's National Convener, Arvind Kejriwal, boasts about being a financial expert. He served as a Joint Commissioner of Income Tax in the Indian Revenue Service (IRS)," Bajwa stated.
Before the Assembly elections in Punjab, he promised to raise revenue from sources, including Rs 20,000 crore annually from mining and Rs 34,000 crore annually by ending corruption. Where has his expertise gone now? Due to the financial mismanagement under the three-year regime of AAP, Punjab has been badly caught in a debt trap," he added.
He added that in 2022, when the AAP came to power, the state's outstanding debt was Rs 2,81,773 crore. By the end of this fiscal, the public debt is projected to touch Rs 4.17 lakh crore. Economists have warned it could reach an alarming Rs 4.50 lakh crore by the end of 2026-27, the final year of this government's term.
“It's high time Punjab's Finance Minister, Harpal Singh Cheema, woke up from deep slumber. What has the AAP government been waiting for? The people of Punjab must also understand that the AAP will not be able to form government in 2027. It is the people of Punjab who will have to pay back such a huge debt eventually," he said.