CHANDIGARH: The cash-strapped AAP-led Punjab government is likely to borrow Rs 12,006 crore from the open market through the sale of state securities in the last quarter of the 2025–26 financial year. As a result, the outstanding debt is estimated to touch Rs 4.17 lakh crore as on March 31 this year, marking a 9% increase from Rs 3.82 lakh crore in the previous fiscal.
Sources said the state government will borrow Rs 3,000 crore in January, Rs 4,000 crore in February and Rs 5,006 crore in March by raising funds from the open market through the sale of state securities. The government has already indicated this borrowing plan to the Reserve Bank of India for the January–March period.
With about a year left for the Assembly elections, the government is under mounting pressure to fulfil its promise of a Rs 1,100 monthly allowance to all women, besides implementing the old pension scheme and releasing pending dearness allowance instalments to government employees.
A net borrowing of Rs 34,201 crore has been projected by the state government in its budget estimates for the current fiscal year, and the remaining amount has already been raised in the first three quarters. This borrowing accounts for about 2.4% of the total Rs 4.99 lakh crore to be raised by states and Union Territories in this quarter through bond sales.
Although the borrowing is within the limits approved by the Union government and the RBI, Punjab remains among the most indebted states in the country, with a debt-to-GSDP ratio of 46%.
A senior state government official, speaking on condition of anonymity, said the loans are being raised at competitive rates to minimise the interest burden. The government, he said, has been renegotiating older loans taken by previous governments at higher interest rates to bring down overall costs.
Sources pointed out that another major concern is that a significant portion of the borrowing has been used for debt servicing, repayment of principal and interest, and for meeting other expenditures. It is estimated that Rs 43,194 crore will be spent on debt servicing in the coming financial year, of which Rs 24,995 crore will go towards interest payments and Rs 18,199 crore towards repayment of principal. This amount will exceed the estimated net borrowing for the year.
Interestingly, in the current fiscal, goods and services tax (GST) accounts for 43.5% of the state’s own tax revenue, making it the single largest contributor.
The opposition has accused the government of pushing the state into financial ruin and warned that Punjab is on the brink of bankruptcy.
The government raised loans of Rs 2,000 crore in July, Rs 3,000 crore in August and Rs 3,500 crore in September. During April and May, it availed loans totalling Rs 6,241.92 crore.
Sources said that till March last year, the state’s total outstanding debt stood at Rs 3.82 lakh crore, which is over 44% of the Gross State Domestic Product (GSDP).
A few months ago, a report on debt-stressed states tabled in Parliament by Union Minister of State for Finance Pankaj Chaudhary expressed concern over Punjab’s debt-to-GSDP ratio, stating that it was the second highest in the country.