Cash-strapped Punjab seeks additional borrowing limit of Rs 10K crore from Centre

To meet its expenses, the cash-strapped Punjab Government has sought an additional borrowing limit of Rs 10,000 crore for the ongoing fiscal.

The state government has reportedly sent a letter in this regard to the Union Finance Minister, seeking additional borrowing limit for this year, over and above the sanctioned borrowing limit of Rs 30,464.92 crore, of which Rs 13,094.34 crore has already been raised till July.

The state government has reportedly claimed that it inherited a legacy debt from the previous governments, which it has to repay. A sum of Rs 69,867 crore is to be repaid by the government this year and

Rs 23,900 crore of its receipts are to be used only for paying interest on loans.

Though the revenue receipts have been growing over the years, the expenditure has grown at a much faster pace. Last year, the Centre effected cuts in the borrowing limit of the state on account of its failure to bring down losses incurred by the Punjab State Power Corporation Limited ( PSPCL), in spite of having gone in for the UDAY scheme (Rs 2,387 crore) and through a cut in capital assistance grant (Rs 1,807 crore).

Over and above this are the Rs 8,500-crore dues that remain unpaid by the Centre. In September, the state could release the salary for the month of August only four days after it was due.

The decision to send the letter, seeking an increase in borrowing limit, was taken at a Cabinet meeting held in August. Recently, the government decided to raise the collector rates for the registration of property and road tax on vehicles. At a Cabinet meeting held last week, the government also withdrew the decision to give subsidised power to domestic consumers having up to 7 KW load and increased VAT on fuel. From today onwards, the state government has also increased the bus fares, with a hope to earn additional revenue of Rs 150 crore. Through these measures, the state is hoping to rev up its revenues by Rs 3,000 crore per annum.

However, this may not be enough. Official sources say they will now be escalating the matter with the Prime Minister’s Office (PMO), seeking his help in tiding over the ongoing crisis.

“The Centre has failed to release our dues on account of Rural Development Fund and under the National Health Mission. Moreover, the compensation given after the GST roll out has been discontinued and the revenue deficit grant given by the 15th Finance Commission reduced to Rs 1,995 crore for the ongoing financial year, as 92 per cent of this grant was released by 2023-24 (the total revenue deficit grant given between 2020-2025 is Rs 25,968 crore). Next year, there will be no revenue deficit grant, squeezing the state further,” said a top functionary in the state government, justifying the need to allow the state to raise more loan.

In dire straits

• The borrowing limit was cut by ~4,194 crore last year
• Of ~30,464.92 crore that Punjab is allowed to borrow, ~13,094.34 crore has already been raised
• Over the past two months, the AAP govt has taken some steps to rev up revenue by ~3,000 crore
• The GST compensation, however, has been discontinued and revenue deficit grant reduced from ~5,618 crore last year to ~1,995 crore this year