Punjab’s financial situation remains precarious, with a significant portion of its budget being consumed by salaries, pensions, and debt servicing. Finance Minister Harpal Singh Cheema on Wednesday presented his fourth budget for the financial year 2025-26, outlining an expenditure plan of Rs 2.36 lakh crore. However, with mounting debt and heavy reliance on central grants and indirect taxes, Punjab finds itself struggling to allocate resources for new developmental initiatives.
From Where Punjab Will Get Its Money?
The total revenue receipts for the upcoming financial year are projected to be Rs 1,11,740.32 crore. The primary sources of income for the state include State Goods and Services Tax (SGST) — the biggest contributor with Rs 27650 crore, accounting for 26.49 percent of the total budget; excise duty on liquor — bringing in Rs 10,576 crore, roughly 4.48 percent of the budget; Rs 8200 crore from Value Added Tax (VAT) on petrol and diesel; Rs 25703.57 crore as share from Central taxes — the amount state receives from Centre’s tax pool as recommended by the Finance Commission; and Rs 12210.57 crore as non-tax revenue — including income from state-owned enterprises, fines, and fees.
However, the revenue generated is insufficient to cover Punjab’s expenses, forcing the government to rely heavily on borrowings. The state plans to raise a fresh loan of Rs 49,900 crore in 2025-26 to meet its financial obligations.
How Will Punjab Spend Its Money?
Out of every Re one, a staggering 53 paise in Punjab’s budget is allocated to salaries, pensions, and debt repayment, leaving limited funds for new projects or welfare schemes. The major allocations include Rs 36,427.90 crore will go towards paying government employees’ salaries; Rs 20,750.11 crore to meet pension liabilities; Rs 20,500 crore towards power subsidy; and Rs 24,995.49 crore on interest payments on existing loans.
Punjab is heavily investing in subsidies, particularly free electricity. The government has allocated Rs 17,606 crore for electricity subsidies, benefiting both households and farmers. About 90 percent of the population avails the 300 unit of free power scheme, while the state also bears the cost of free bus travel for women.
Mounting Debt
Punjab’s debt burden is a cause for serious concern. As of 2025-26, the state's outstanding debt is projected to reach Rs 3.96 lakh crore, up from Rs 3.74 lakh crore in the previous year. This means that every citizen of Punjab effectively carries a debt burden of Rs 1.24 lakh.
The state's debt-to-GSDP (Gross State Domestic Product) ratio stands at 42.05 percent — a figure significantly higher than the recommended limit. This excessive borrowing limits Punjab’s ability to fund new infrastructure projects and welfare schemes without further increasing its financial liabilities.
Challenges Ahead
As per experts, with most of the budget consumed by fixed expenditures, the state has little room for development projects. Reliance on loans to meet revenue shortfalls is pushing Punjab deeper into a debt trap; with free electricity and other welfare schemes, though politically popular, are draining state resources. Punjab’s tax collection, particularly from GST and excise, is insufficient to meet growing financial demands.
Quote-Unquote
“Budget is a paradigm shift to Rangla Punjab from the regressive one during the previous regimes…funds have been earmarked for every sector like health, education, jobs, industry and others which will give impetus to development of the state. It is a matter of great pride and satisfaction that this third tax free budget has been presented by my government”
- Chief Minister Bhagwant Mann
“When AAP Government was formed in 2022, the people of Punjab voted for change. We are correcting all the wrongs done by the SAD-BJP, Congress Governments in Punjab. We are working to get the youth out of the trap of drugs. We have launched a campaign against drugs and for this, we have made special provisions in the budget. Whether it is to purchase anti-drone systems, recruit 5000 Home Guard jawans, setting up more than 1000 sports nurseries, we will break the chain of drugs, we will take our youth towards sports”
- Finance Minister Harpal Singh Cheema
“This is a defeatist budget as the AAP appears to have reconciled to its imminent defeat and exit. Looks like a ‘preemptive revenge’ against people of Punjab”
- Punjab Congress chief Amarinder Singh Raja Warring
“Before implementing the drug census, Chief Minister Bhagwant Mann and all 117 MLAs should undergo drug tests conducted by an independent health agency”
- Leader of Opposition Partap Singh Bajwa
“Empty vessels make the loudest noise. AAP has failed to deliver Rs 1,000 per month for women and added Rs one lakh crore to Punjab’s debt”
- Union Minister, BJP leader Ravneet Singh Bittu
“AAP government and CM Bhagwant Mann have betrayed Punjabis by going back on all promises, failing farmers, women, youth, businesses, and weaker sections of society”
- Former Deputy Chief Minister Sukhbir Singh Badal
