New Delhi (National Times): In a significant financial jolt to the Punjab government, the Central Government has slashed the state’s borrowing limit by a massive Rs 16,676 crore for the current financial year, citing unpaid power subsidies and rising debt liabilities.
As per a report in The Tribune, the Punjab government had sought approval for borrowing up to Rs 47,076.40 crore for the fiscal year 2025–26. However, the Centre has sanctioned only Rs 30,400.40 crore, leaving a substantial gap in the state’s borrowing capacity.
Shortfall in Quarterly Borrowing Allocation
For the April–December 2025 period, Punjab had requested a borrowing limit of Rs 35,307 crore. But the Centre has approved only Rs 21,905 crore, well below the demand. Overall, the state had aimed for a borrowing ceiling of Rs 51,117 crore for the entire fiscal year, which is now drastically curtailed.
Why the Cut Was Made
The reduction is primarily attributed to Punjab’s failure to clear substantial dues related to electricity subsidies. The state government owes Rs 5,444 crore in unpaid power subsidy to electricity companies, with an additional Rs 4,107 crore in pending payments still outstanding.
Adding to the concern, Punjab recently secured fresh loans amounting to Rs 4,151.07 crore to support the power sector and had earlier borrowed Rs 1,976 crore for similar needs during the previous financial year.
Escalating Debt Burden
Punjab’s financial stress is further exacerbated by its ballooning debt. By the end of the current fiscal year, the state’s total outstanding debt is projected to cross Rs 4.17 lakh crore. A significant chunk of fresh borrowings continues to go toward repaying past debts and covering interest obligations.
For 2025–26, the state must repay Rs 18,189.89 crore in principal debt and an additional Rs 24,995.49 crore in interest—highlighting the growing financial strain.
Fiscal Deficit Widening
Punjab anticipates total revenue receipts of around Rs 1.11 lakh crore this year. However, projected expenditures are estimated at Rs 1.35 lakh crore, leading to a projected fiscal deficit of Rs 23,957.28 crore.
With the borrowing cap now lowered, experts warn that Punjab may face serious challenges in funding development schemes, servicing existing obligations, and maintaining fiscal discipline. The move also places added pressure on the state government to manage subsidies more effectively and streamline its financial priorities in the months ahead.
