Punjab to borrow more as debt burden mounts
Amid concerns over rising state debt, the Punjab government has planned to borrow ₹5,000 crore in the third quarter of the current fiscal year.
₹5,000 crore in the third quarter of the current fiscal year. (HT File)” title=”The Punjab government has planned to borrow ₹5,000 crore in the third quarter of the current fiscal year. (HT File)” />The state government would raise this amount from the market through the sale of state securities during the October-December period. Of the planned borrowing, ₹2,000 crore has already been taken in October, with the remaining ₹3,000 crore to be raised in November and December, as outlined in the indicative calendar the state government shared with the Reserve Bank of India (RBI). These funds will primarily be raised through the auction of government securities with a tenure of 20 years.
With this, government borrowing will reach ₹26,119 crore between April and December this year. The state government has been on a borrowing spree, raising ₹21,119 crore in the first half (April-September) of the 2024-25 financial year, which amounts to approximately 70% of the net borrowing of ₹30,464.92 crore projected in the budget estimates 2024-25. A significant portion of these funds have been raised through the central bank’s banking solution, E-Kuber, following the borrowing calendar.
These borrowings have sparked concerns over the state’s growing debt, which is projected to rise to a staggering ₹3.74 lakh crore by the end of the financial year 2024-25. The opposition parties have repeatedly accused the present government of “fiscal mismanagement” and pushing the state into a “debt trap”, while the ruling AAP has blamed the fiscal mess it inherited two-and-a-half years on previous governments’ profligacy, failure to make capital investments and inability to realise potential and non-tax revenues. A high level of outstanding debt consumes resources of the state, leaving little for capital expenditure.
A major portion of government borrowing has been going into debt servicing – payment of principal and interest — as well as meeting other expenses. This year, debt servicing, set at ₹36,766 crore, including a whopping ₹23,900 crore on interest payments and ₹12,866 crore on repayment of principal, exceeds the estimated net borrowing for the year. “The government has not able to generate enough revenue to meet its current expenditure. This deficit is being met through loans,” an economist said.
The Comptroller and Auditor General (CAG), in one of its reports on the finances of Punjab, had advised the state government to use borrowed funds as far as possible to fund capital expenditure and meet its revenue expenditure through tax and non-tax revenues. Arbind Modi, the chief adviser (fiscal affairs), who was appointed last month to guide the government on financial resource mobilisation, augmentation of state’s resources and restricting of financial debt, has started discussions with officials of the finance department regarding revenue receipts, committed liabilities, and debt management.
