Jolt to debt-stressed Punjab, Centre cuts borrowing limit by Rs 16,676 cr
The Centre has imposed a drastic cut in the open market borrowing limit of Punjab. Against the limit of Rs 47,076. 40 crore sought by the state government, a cut of Rs 16,676 crore has been imposed.
The state government has been intimated about the cut. A letter has also been sent by the Department of Expenditure in the Union Ministry of Finance to the Reserve Bank of India.
Punjab has been accorded approval to borrow Rs 21,905 crore for the first nine months of the ongoing financial year (April-December), as against the borrowing of Rs 35,307 crore demanded for this time period. For the entire ongoing fiscal, Punjab had demanded a gross borrowing limit of Rs 51,117 crore, which includes the remaining components of borrowing like negotiated loans from NABARD, SIDBI and transfer from state PF and public accounts.
This cut on market borrowings imposed by the Centre has widespread ramifications for a debt-stressed state like Punjab, which depends heavily on the money it raises as loans each year.
Though officials and functionaries in the Finance Department have remained tight-lipped about the development, The Tribune has learnt that the deductions have been made because of unpaid/outstanding power subsidy (Rs 5,444 crore); unpaid power subsidy arrears of Rs 4,107 crore; additional borrowing linked to the power sector (Rs 4,151.60 crore); and previous years’ power sector-based borrowings of Rs 1,976 crore.
Punjab Finance Minister Harpal Cheema said this cut amounted to “financial strangulation” of the state, especially at a time when the Centre was already imposing cuts on Punjab’s dues such as the Rural Development Fund. By doing so, the Centre was “showing its hatred” against the state, he said.
“The state had earlier agreed to and started routing all funds through the consolidated fund. In spite of this, financial cuts are being imposed on the state, which is already debt-stressed,” he said.
The state’s outstanding debt by the end of 2025-26 will be Rs 4.17 lakh crore.
Almost 90 per cent of this new limit of open market borrowings will go towards servicing of the state’s legacy debt and repaying the old loans.
This year, the state has to repay old debt of Rs 18,198.89 crore. Another Rs 24,995.49 crore will go towards interest payment on the old loans taken by the state government.
This year, Punjab has targeted a revenue receipt of Rs 1.11 lakh crore, though the state’s revenue expenditure is targeted at Rs 1.35 lakh crore. As a result, the revenue deficit will be Rs 23,957.28 crore.
