Cost of freebies

BOTH Punjab and Himachal Pradesh are reeling under severe financial stress, a crisis stemming from populist promises made during electoral campaigns. In Punjab, the Aam Aadmi Party’s (AAP) commitment to provide 300 units of electricity free of cost to the consumers has resulted in a subsidy bill of over Rs 20,000 crore for the current financial year. Himachal, where the Congress is in power, revived the Old Pension Scheme (OPS), adding a significant burden to an already strained exchequer.

Punjab’s predicament is worsened by delayed subsidy payments, with the pending bill crossing Rs 4,500 crore. The Punjab State Power Corporation Limited is struggling with a dip in collection efficiency, dropping from 106% to 73%, and soaring transmission losses. Attempts to raise revenue, including recovering dues from defaulters and government departments, have yielded little relief. With the state nearing its borrowing limit, the sustainability of the free electricity scheme is under question. Himachal Pradesh faces a similar plight. The restoration of OPS has inflated the state’s financial obligations, requiring Rs 2,000 crore monthly to meet salary and pension commitments. Exhausting its loan limit of Rs 6,200 crore, the state is now relying on future borrowings to manage day-to-day expenses. The situation is set to worsen as the Centre’s revenue deficit grant is expected to be halved next fiscal year.

Both states accuse the BJP-led Centre of withholding funds and showing a discriminatory attitude. Himachal’s exclusion from the Special Assistance for Capital Investment Scheme has sparked a political outcry, while Punjab alleges bias in the allocation of development funds. However, the root cause lies in unsustainable fiscal policies driven by electoral populism. As state governments grapple with mounting debt and shrinking revenues, it is imperative to shift focus from doles to structural reforms. Fiscal prudence, efficient tax collection and targeted subsidies are the need of the hour.