Punjab budget: Debt makes a steep rise, opponent targets AAP

Chandigarh: Aam Aadmi Party (AAP)’s pre-election promise of making Punjab debt free met with reality in its first full budget presented on March 10, Friday.

Even as the overall budget outlay increased by 26%, Punjab’s debt saw a steep hike of Rs 31,000 crore (from 2.61 Lakh crore in 2021-22 to 2.92 Lakh crore in 2022-23) in the first year of the AAP government in Punjab.

This by far is the quantum jump in Punjab’s debt. Last Congress government added Rs 66,000 crore in debt during its five-year rule between 2017-22.

The new AAP government’s borrowing in the first year of its rule is nearly half of what the previous government had added in the entire five years.

As per the budget, the debt figure is estimated to cross Rs 3.27 Lakh crore mark at the end of the next financial year 2023-24.

This means that there will be an addition of another Rs 35,000 crore in the next 12 months, although the debt figure in revised budget estimates may go even higher.

According to a report from the Reserve Bank of India (RBI), Punjab is now amongst the few states in the country which are under high public debt.

Punjab’s outstanding debt is nearly 50% of its Gross Domestic Product (GDP), and more than four times its revenue for the financial year 2022-23.

The most troubled part of Punjab’s debt growth is that most borrowings are being consumed in debt servicing.

The latest Comptroller and Auditor General (CAG) in its report tabled during the ongoing budget session revealed that the state used most of its borrowed funds for the repayment of principal and interest on outstanding loans.

In 2022-23, the AAP government paid almost 36000 crore on debt - Rs 15,946 crore as principal and Rs 20,100 crore as interest on previous loans.

In the next financial year, Punjab would repay Rs 38,626 crore as principal and interest, Punjab Finance Minister Harpal Cheema said during his budget presentation.

Indiscriminate situation

Noted economist RS Ghuman told Newsdrum that there is a complete financial mess in Punjab right now and the problem is that situation is becoming more serious with every budget.

He said there are two-three major reasons for Punjab falling into a debt trap.

First is that revenue collection of the state is at least 30% less, which means there is a large scale pilferage, embezzlement and tax evasion, Ghuman added.

He said, on the contrary, there is a continuous increase in expenditure. The current policy of “subsidy for all” culture has put an indiscriminate burden on state finances.

According to him, as per Punjab's latest budget, Punjab’s total subsidy bill would touch Rs.22000 crore for the next fiscal year even as 35%-40% of Punjab’s total revenue is spent on debt servicing.

This, he said, Punjab’s debt is not only increasing Punjab’s revenue and fiscal deficit but is also limiting the government’s capacity to incur money on development activities and quality of governance.

Even as the Punjab government has claimed to have increased the budget outlay by 26% to be used for the health and education sector, several institutions in Punjab are not happy with the budget.

Punjabi University in Patiala criticized the Punjab government for slashing its grant in the new budget.

Punjabi University Vice Chancellor Prof. Arvind said in a statement that it clearly means that saving and running Punjabi University is not the priority of the government.

As per the Punjab budget, the revenue deficit for next fiscal year is likely to stay close to Rs 25,000 crore even as it has set aside 20,000 for power subsidy, up from Rs 12,000 crore in the last budget.

This included subsidy for domestic consumers at Rs 7,780 crore, agriculture pump set consumers at Rs 9,331 crore and Rs 2,700 crore for industrial consumers.

Punjab’s power subsidy bill has increased substantially after the AAP government implemented 300 units of free electricity for domestic consumers, one of its pre-election promises.

If experts are to be believed, Punjab’s subsidy bill may cross Rs 30,000 crore per annum in case the AAP government implements its other pre-election promise of giving Rs 1000 per month of financial assistance to all women above 18 years of age.

If this happens, it would put more pressure on state finances and create potential avenues for a further hike in Punjab’s debt, experts said.

Mann hails budget, opposition targets

Hailing the budget 2023-24 presented by Finance Minister Harpal Cheema as ‘Aam Lokaan Da Budget’, Punjab Chief Minister Bhagwant Mann described it as a roadmap for a new, progressive and prosperous Punjab.

He said that the total Budget Expenditure of ₹1,96,462 crore for FY 2023-24 reflects 26% growth compared to FY 2022-23, which reflects the commitment of the state government to ensure uninterrupted development in Punjab.

Mann said that the allocation for agriculture and allied sectors has been enhanced by 20% to take adequate steps for making farming a profitable venture.

The Chief Minister said that the provision to introduce a “New Agricultural Policy” with the objective to conserve natural resources and enhance farmers’ income will go a long way in bailing out the farmer from the current agrarian crisis.

He said that an allocation of Rs 1,000 crore for a special scheme on diversification during the upcoming financial year will also act as a catalyst for the well-being of farmers.

Bhagwant Mann said that the proposal to provide crop insurance to farmers to save them from the vagaries of the weather and other uncertainties is also a historic decision to safeguard the interests of the farmers.

The Chief Minister said that the proposal to set up the five new Horticulture estates in Ludhiana, Gurdaspur, Patiala, Bathinda and Faridkot and the proposal of keeping Rs 100 crore in the next financial year to nudge MILKFED to reach new heights will also go a long way in the well being of the farmers.

Bhagwant Mann said that it is a matter of great pride and satisfaction that an outlay of Rs 17,072 crore for school and higher education has been kept which is 12% higher than the previous year.

He said that a budget of Rs 200 crore has been kept for the upgradation of schools into Schools of Eminence adding that an allocation of Rs 18 crore for OBC students and Rs 60 crore for SC students has been kept.

The Chief Minister said that provision to re-activate over 14,500 youth clubs in the State will help in channelizing the unbounded energy of youth in a positive direction.

He also said that an allocation of Rs 1000 crore for Medical Education and Research will help in making the state a hub of Medical education.

On the other hand, Punjab Congress president Amarinder Singh Raja Warring said that the Aam Aadmi Party government was completely exposed by its own admission and revelations made in the budget.

Referring to the debt situation, Warring pointed out, the AAP government took Rs 31000 cr worth of loans in 1 year while on average the Congress government took Rs 15000 per year and Rs 73000 cr in 5 years.

At this pace, the AAP will indebt the state further by over Rs 1.5 lakh crores, he said.

Taking a dig at the AAP convener Arvind Kejriwal’s claims that he would generate Rs 20,000 crores from sand mining, Warring pointed out, the budgetary figures showed that the state earned just Rs 153 crores from sand mining last year.

“Either you have pocketed the balance amount or you must apologise to the people of Punjab that you lied about income from sand mining”, the PCC president told the government. “And what about Rs 34,000 crores which Kejriwal promised to save from corruption?” he asked.

Similarly, the PCC president added, in the 2022-23 budget the AAP promised to shortlist 100 existing schools and upgrade them to institutes of eminence. Rs. 200 crores were allocated for the same. The same promise has been repeated this year as well, without any mention of having done anything so far.

He pointed out that in 2022-23, AAP promised to establish 16 new medical colleges over a period of 5 years, but this year it has proposed budget allocation for only 2 new medical colleges which means at this rate they would not even be able to start 5 colleges in 5 years.

Shiromani Akali Dal (SAD) President Sukhbir Singh Badal on the other hand accused the AAP government of playing another fraud with Punjabis by fudging figures to paint a rosy picture in budget 2023-24.

He said truth is that the state deb touch Rs 3.47 lakh crore by end of 2023-24, suggesting that the State was hurtling towards financial bankruptcy.

Badal also exposed the revenue figures given by the AAP government, saying the very fact that the fiscal deficit was pegged at Rs 34,784 crore meant that even the meagre resources allocated for various departments and schemes were not likely to be released.

He said even the revenue deficit had doubled from Rs 12,553 crore to Rs 24,588 crore.

Asserting that the budget 2023-24 reflected the complete administrative failure of chief minister Bhagwant Mann, the SAD President said “AAP has also gone back on all promises made to the people''.

He said this was the second budget to be presented by the AAP government but yet no allocation had been made to provide an allowance of Rs 1,000 per month to all women in the state.

“Money has not been allocated for the Old Pension Scheme whose revival was announced with much fanfare. Similarly, no money has been allocated for any infrastructure project including power generation, he added.