NEW DELHI/CHANDIGARH, May 21: The Centre has significantly curtailed Punjab’s open market borrowing limit, approving only ₹21,905 crore for the first three quarters of the current fiscal year—₹13,402 crore short of the ₹35,307 crore the state had sought for the April-December period.
Overall, the Union Finance Ministry has reduced Punjab’s borrowing ceiling by ₹16,676 crore, sanctioning ₹47,076.40 crore instead of the ₹51,117 crore requested for the full fiscal year 2025–26. A formal intimation has been sent to the Reserve Bank of India by the Department of Expenditure.
“This amounts to financial strangulation,” said Punjab Finance Minister Harpal Cheema. “The Centre is imposing cuts even as the state has routed all its funds through the Consolidated Fund. This is nothing but the Centre showing its hatred against Punjab.”
The reduced borrowing ceiling, officials say, will severely impact Punjab’s capacity to meet its fiscal obligations. With a projected outstanding debt of ₹4.17 lakh crore by the end of 2025–26, nearly 90% of the sanctioned borrowing will go toward debt servicing alone.
This year, Punjab is required to repay ₹18,198.89 crore in principal and ₹24,995.49 crore in interest payments, placing further pressure on its already fragile finances. The state’s revenue receipts are estimated at ₹1.11 lakh crore, while revenue expenditure is expected to touch ₹1.35 lakh crore, leaving a revenue deficit of ₹23,957.28 crore.
Although top officials in Punjab’s Finance Department have not commented publicly on the development, sources indicate that the Union government’s decision is tied to unresolved financial issues, particularly in the power sector.
Among the deductions contributing to the cut are outstanding power subsidy payments worth ₹5,444 crore, subsidy arrears of ₹4,107 crore, and sector-linked additional borrowings of ₹4,151.60 crore. Another ₹1,976 crore accounts for prior-year loans tied to the power sector.
For Punjab, which relies heavily on loans to fund its developmental and operational needs, the Centre’s move could further restrict public spending. The state had also included in its borrowing proposal funds raised through institutions like NABARD and SIDBI, along with transfers from state public accounts and provident funds.
With limited fiscal space and mounting debt obligations, the state government now faces the challenge of managing critical expenses amid a tightening financial grip.
“We are already a debt-stressed state,” said Cheema. “This cut will only deepen the crisis.”
