Gap in Punjab’s receipts, expenditures widens as grants-in-aid shrink by half

The Grants-in-aid received by the Punjab Government from the Centre have shrunk by almost half between the first quarter of the ongoing fiscal and the corresponding period of 2024.

Grants-in-aid are not loans that the state needs to repay, but are devolutions made to state governments by the Centre for specific projects. The revenue deficit grant or post devolution revenue deficit grants are given to states to cover the gaps in revenue accounts.

According to the fiscal indicators of the first quarter of 2025-26 financial year, Punjab received just Rs 793.74 crore as grants-in-aid. In the same period last year, the amount received was Rs 1,471.99 crore. This fall of Rs 678.25 crore has impacted the total revenue receipts of the state government which, though higher than the first quarter of 2024-25, are lower than the targeted receipts. The state’s revenue receipts between April- June 2025 are Rs 22,938.23 crore, which is just 20.04 per cent of the total targeted revenue of Rs 1,11,740.32 crore for the entire fiscal. Generally, revenue collection in the first quarter is high.

Information available with The Tribune shows that the main reason for this reduction in grants-in-aid from the Centre is that the revenue deficit grant received by the state in the 15th Finance Commission has ceased to exist. The Commission had given Punjab a total grant of Rs 25,968 crore from 2021-26. While Punjab got the maximum grants in the first two years, Rs 10,081 in 2021-22 and Rs 8,274 crore in 2022-23, this grant has been tapering thereon.

In 2023-24, Punjab got Rs 5,618 crore and in 2024-25, the state had received Rs 1,995 crore, and none is to be received this year.

The Tax Revenue and Non-Tax Revenue collected in the first quarter, though higher than last year, is still less than 25 per cent of the targeted revenues. The Tax Revenue is Rs 19,610.18 crore (22.05 per cent of this year’s target) and Non Tax Revenue is Rs 1,994.31 crore (16.33 per cent of the target). Even the Revenue Expenditure has gone up by Rs 1,352 crore, from Rs 29,024.39 crore last year to Rs 30,376.93 crore between April-June this year.

As a result, the state’s borrowing in the first quarter has increased over the last year’s first quarter by Rs 327.03 crore. Between April and May, the Punjab Government raised loans of Rs 9,365.25 crore. Though the fiscal indicators for the ongoing month have not been collated, The Tribune has learnt that the state government has already raised Rs 2,000 crore in order to repay the legacy debt during this month. Between July and September, the second quarter of this year, the Punjab Government proposes to raise Rs 8,500 crore through market borrowings.

Fiscal indicators for first quarter of 2025-26

Revenue Receipts Rs 22,398.23 cr

Tax Revenue Rs 19,610.18 cr

Non-Tax Revenue Rs 1,994.31 cr

Borrowings Rs 9,365.25 cr

Revenue Expenditure Rs 30,376.93 cr

Revenue Deficit Rs 7,978.70 cr

Grants-in-Aid Rs 793.74 cr