AAP’s Freebies are Worsening Punjab’s Financial Health

In a state with accumulated loans of close to Rs 3 lakh crore and almost heading towards bankruptcy owing to reliance on doles in election years, the government is recklessly fulfilling its poll promises of free electricity, water and other freebies at the cost of the state exchequer.

There also remains the issue of outstanding power bills of over Rs 12,600 crore to the Punjab State Power Corporation Limited (PSPCL) which the previous Government could not clear. For FY 2022, the State’s power subsidy bill was Rs 10,668 crore, of which 70 percent were for farmers who pay no power bill. For the current fiscal, PSPCL has reportedly sought subsidy of Rs 14,000 crore based on the existing tariffs. AAP’s promise will take the power subsidy to around Rs 20,000 crore, almost 20 percent of its revenue expenditure and 15 percent of its budget.

Between April and October, the government has borrowed Rs 13,940.15 crore. Another Rs 4,000 crore is learnt to have been borrowed by the government in November and December. A large amount of money has also gone into repayment of old debt and interest (Rs 8,795 crore). Till March this year, the state’s outstanding debt liability was Rs 2.83 lakh crore. By the end of this fiscal, the state’s outstanding public debt will cross Rs 3 lakh crore, which works out to be a per capita debt of Rs 1.01 lakh.

The AAP government rolled out its biggest promise of 300 units of free power from July 1, 2022, onwards. A large number of citizens paid nothing towards electricity after the scheme was launched. However, it also meant the state would a burden of Rs 1,800 annuallly. This is significantly a lot given that the state has a whopping debt of around Rs 3 lakh crore. The power subsidy bill alone is set to cross Rs 20,000 crore mark this fiscal year, in addition to Rs 7,117 crore due from the previous fiscal.

The AAP government has not yet been able to fulfill its promise of giving Rs 1,000 per month to the women of Punjab who are above 18 years of age. It was one of the key poll promises announced by AAP convenor Arvind Kejriwal in the run-up to the Punjab Assembly elections. Once implemented, it would cost the state exchequer Rs 12,000 crore per year. This promise in the manifesto is something which Election Commission itself must not have permitted as per Representation of People Act, 1951. 

The politics of populist promises and freebies have already damaged the economy of the state. The fulfillment of AAP’s poll guarantees like free electricity and Rs 1,000 per month to women would leave a huge dent on the exchequer, and the government would additionally need to borrow to keep up with the promises. Further, the burden on the exchequer without increasing the state revenue indicates no significant change in political thinking.

Some of the financial parameters of Punjab, a highly indebted state, for instance, are similar to Sri Lanka’s. Punjab’s debt-to-GDP ratio is now the highest in the country at 53.3%, in contrast to the ceiling of 20% as agreed by the Centre and states of India. It means the debt of Punjab is more than 50% of the total monetised value of production in Punjab in a year.

The governing style of the Bhagwant Mann-led government makes it clear that there is a heavy dominance of AAP’s Delhi ‘think tank’ over the state’s decision-making process.AAP in Punjab is also facing an intense ‘perception’ challenge that the government in Punjab is a proxy government with dominant control in hands of the party’s high command in Delhi.

Word Smitheries

Doles - benefit paid by the government to the unemployed

Proxy - the authority to represent someone else,